Cricket's sugar daddy Subrata Roy cuts his losses on IPL

It seems Sahara has made a good decision by pulling out Pune Warriors, the league’s costliest franchise at $370m (approximately Rs 1,700 crore). It is also withdrawing from sponsorship of the India cricket team.

Why? Because the embattled group, which is caught between Sebi and the Supreme Court for returning hundreds of crores to investors in two of its companies, can now save some serious cash.

According to a report in Business Standard , by opting out of IPL and deciding not to rebid for the sponsorship of the Indian cricket team, whose contract ends in December, Subrata Roy’s Sahara Group will be able to save nearly Rs 400 crore annually.

In 2010, Sahara had bid Rs 1, 700 crore for the IPL Pune franchise for 10 years on the basis of a certain minimum number of matches. But the BCCI reduced the actual number of matches to be played based on the number of franchisees left in the tournament. Sahara has cried foul over this.

Business Standard reports that the company would have earned Rs 110 crore as revenues, which would include a share of the broadcasting revenues from BCCI, in-stadia ticketing and also earnings from team sponsorships. Against this, there is the Rs 170 crore the group has to pay as part of its annual franchise payments to BCCI.

As for the Indian team sponsorship, the group has spent over Rs 661 crore since it renewed its contract with BCCI in 2010.

So, like many other IPL franchisees, Sahara had been losing big money.

Sahara’s decision came hours after theBCCIencashed bank guarantees worth Rs 137 crore submitted by the group when it had bought the franchise.

Sahara claimed that the BCCI turned a deaf ear to its pleadings for arbitration and reducing the franchise fee (because they had got just 64 matches instead of the promised 94 matches) even though it has been paying the full franchise fee of Rs 170 crore.

“We continuously requested BCCI for arbitration from June 2011. But BCCI is only concerned about money and not about the genuine interests of the franchisee. Thus, (when) we could not penetrate BCCI’s deaf ears, we announced our withdrawal in February 2012,” it added.

However, BCCI treasurer Ajay Shirke told Times of India why it decided to encash the bank guarantee. “Sahara was supposed to pay 15 percent of the yearly franchise fee in January. They paid it late. And the remaining 85 percent was due to us before the first match. They didn’t pay that till the completion of the league matches. We had no option but to encash the bank guarantee.”

Financially, though, given the Pune team’s losing streak, Sahara’s decision to pull out of IPL is essentially a move by Subrata Roy to cut his losses.