How Sun TV won and Sahara lost in IPL's bear market

On 21 March 2010, Sahara Adventure Sports Limited made the winning bid of $370 million (approximately Rs 1981 crore by today’s value) for the Indian Premier League’s Pune franchise.

The bid is the highest bid by any company in the history of IPL and it likely to remain that way given that the Sun TV Network won the Hyderabad Franchise for an amount of Rs 85.05 crore per year. Sahara, in comparison, are paying 190-odd crore per year.

The BCCI press release said that the Sun TV Network’s franchise fee represents a premium of over a 100% above the amount paid by DCHL for the Hyderabad Franchise in 2008. But Sahara must be wondering why they paid so much for their IPL team.

Sahara even had to do all the hard work — try and build a fan base and a stadium. Sun TV, on the other hand, have a set fan base and they only need to continue the good work. Indeed, Kalanithi Maran, owner of $2.8 billion (approx Rs 15,000 crores) Sun Group, must have patted himself on the back after the deal was concluded.

According to Forbes.com, Kalanithi is currently 24th in the list of the richest Indians but he wasn’t ready to pay top dollar for this deal. Is it a sign that the value of the IPL is starting to erode?

Would it surprise anyone if Sahara decided that they wanted to renegotiate their contract in the wake of what everyone else is paying for their franchise to the BCCI?

In 2008, when Mukesh Ambani’s Reliance Industries Ltd made the highest bid for an Indian Premier League franchise ($124 million for Mumbai), many termed it as a gamble.

The GMR Group purchased the Delhi Daredevils for $84 million. India Cements paid $91 million to acquire the rights to the franchise for 10 years in 2008. Kings XI was bought for a total of $76 million. KKR was bought by Shah Rukh Khan’s company Red Chillies Entertainment in partnership with actress Juhi Chawla and her husband Jay Mehta for a price of $75.09 million.

Reliance Industries Limited purchased the rights for the Mumbai franchise of Indian Premier League for $124 million. The Rajasthan Royals cost their owners just $67 million while the Bangalore franchise was bought for $ 111.6 million.

In 2010, when Sahara paid $370 million, the BCCI spoke in glowing terms about how it was an affirmation of the IPL’s increased brand value. Rendezvous Sports World had also forked out $333.33 crore for Kochi, a team that doesn’t exist anymore.

In fact, these two bids were worth a total of about Rs 3,235 crore (when converted to Indian rupees) which was more than the Rs 2,853 crore that was collectively paid by the existing eight franchise owners in the first auction.

But what will they say now? Have the Sun TV Network group got the team really cheap or did Sahara pay too much for their team? Either way, a few blood vessels would have been popped in the Sahara offices.

This does prove that the IPL is very much like the stock market. Sahara chose to jump in at a really wrong and they are still reeling from the after-effects. Sun TV, on the other hand, might just get a lot more bang for their buck.