2012-12-21

New IPL franchise eyes sponsors

Media conglomerate Sun TV Network Ltd, the latest entrant in the Indian Premier League (IPL), is likely to sign up sponsors for its new Hyderabad-based Sunrisers team by the end of January.

The team will also finalize its budget for new players before the IPL auction, expected to take place in January.

“We are talking to a lot of clients. My sales guys are on the job,” said K. Shanmugam, chief executive of Sunrisers, adding that he expected to finalize sponsors by January-end. He refused to disclose the names of the sponsors the team was talking to. The Sunrisers name and logo were officially unveiled in Hyderabad on Thursday.

Former India captain and selector Krishnamachari Srikkanth has been named the team’s mentor and strategic analyst, while Hyderabad-based V.V.S. Laxman will be mentor and brand ambassador. Australian Tom Moody, former coach of Sri Lanka and the Kings XI Punjab IPL team, has been named coach. Sri Lankan Kumar Sangakkara will captain the team.

The management has retained all the 20 players of the erstwhile Deccan Chargers, the Hyderabad-based franchisee that was terminated after it ran into trouble with the Board of Control for Cricket in India (BCCI).

Financially troubled newspaper publisher Deccan Chronicle Holdings Ltd, the owner of Deccan Chargers and publisher of newspapers Deccan Chronicle, Financial Chronicle, Asian Age and Andhra Bhoomi, failed to furnish a Rs.100 crore bank guarantee and the team was terminated shortly afterwards.

BCCI then invited bids for a new IPL team for one of 12 cities—Ahmedabad, Cuttack, Dharamsala, Indore, Hyderabad, Kanpur, Kochi, Nagpur, Noida, Rajkot, Ranchi and Visakhapatnam.

Media baron Kalanithi Maran-controlled Sun Network won the franchise bid for Rs.85.05 crore per year over the next five years, or a total of Rs.425 crore, on 25 October, beating the only other bidder, real estate firm PVP Ventures Ltd.

PVP, which has made an unsuccessful Rs.900 crore offer for the Deccan Chargers team earlier, bid Rs.345.15 crore for five years (or Rs.69.03 crore a year) during the auction.

“Sun Group has a huge presence in Hyderabad. It is a question of building loyalty,” Srikkanth said. “We love the game and we always were in the entertainment business,” he said, on the logic behind a Chennai-headquartered organization investing in a Hyderabad team.

Shivlal Yadav, vice-president of the Hyderabad Cricket Association, said: “There was a time when cricket fans of Hyderabad were a little worried whether Hyderabad will be represented in IPL or not; but with Sun TV coming on board, things will be back to normal.”

A senior executive referred to the multiple brand presence of the group in Andhra Pradesh. The Sun Group runs six television channels in Andhra Pradesh—Gemini TV, Gemini Comedy, Gemini Music, Gemini Live, Gemini News, Kushi TV—radio channel Red FM, and direct to home (DTH) service Sun Direct DTH.

“They have an option of packaging their IPL and media businesses (TV, FM radio and DTH) for advertisers and sponsors,” said Hiren Pandit, managing partner of GroupM ESP.

Maran is also the promoter of the country’s second largest low fare carrier SpiceJet Ltd. that has flights to and from Hyderabad, Visakhapatnam, Tirupati and Vijayawada in Andhra Pradesh.

“All the logos will be behind this (Sunrisers). Our muscle will be behind this,” said Aldam Jacob, head of Sun TV Network’s non-fiction programming.

Sun TV Network will incur a cost of Rs.150 crore each year in the IPL venture, and expects to earn a revenue of Rs.130 crore, said a Mumbai-based analyst who tracks the company. He didn’t want to be named.

The largest chunk of its cost will be the BCCI fee of Rs.85 crore, followed by players’ salaries of Rs.40 crore. The remaining Rs.25 crore will be marketing expenses, stadium fees and other charges. Sun expects its IPL venture to break even in the second year, implying that revenue will rise to Rs.150 crore.

The franchise is expected to make profit from the third year and generate sizable cash flows starting from the fifth year, said the analyst.

Sun TV Network gained 2.67% to close at Rs.424.65 on BSE on Thursday, while the Sensex was down 0.11% to finish at 19,453.92 points.

The new management has spent Rs.40-44 crore on the team so far, including clearing some dues owed to players by Deccan Chronicle Holdings.

With the IPL player auction a month away, the team management, including Srikkanth, Laxman and Sangakkara, will meet on 15 January and finalize the players it wants for the next IPL season, which starts 3 April 2013.

Srikkanth said the team is looking for two good all-rounders, which the line-up lacked, according to him. “There is enough time to put our minds together.” Srikkanth said. “We all know what it takes to be a winning combination.”

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