March 19 (Bloomberg) -- Cricket has proven a better investment than the stock market for India’s billionaires, prompting tycoons to line up this weekend to buy new franchises.
The Indian Premier League, playing a three-hour version of the traditional five-day game, has set a March 21 deadline for prospective owners to bid for its ninth and 10th teams. The $225 million minimum is more than double the highest bid submitted for an original team.
The eight teams’ owners include Mukesh Ambani, the world’s fourth-richest man and chairman of Reliance Industries Ltd.; billionaire Vijay Mallya, chairman of UB Group; Rupert Murdoch’s son, Lachlan; and movie megastar Shah Rukh Khan. The league’s appreciation outpaced last year’s 81 percent gain in India’s benchmark Sensitive Index, the most in 18 years.
“The speed with which the IPL has been able to generate value in a very short span of time is astonishing,” said Unni Krishnan, managing director of Brand Finance in India. “I would bet that there is no comparable brand in the world.”
Growth was fueled by a $1.8 billion TV contract with a Sony Corp. unit and a deal with Google Inc. to show matches on YouTube. Now IPL founder and chairman Lalit Modi, 46, wants to bring the fast-paced version of the game, called Twenty20, to the U.S. Modi met USA Cricket Association Chief Executive Officer Donald Lockerbie in Dubai last month to discuss holding IPL matches on American fields, or pitches, by 2011.
Brand Value Doubled
The IPL has more than doubled its brand value to $4.13 billion now from $2.01 billion in 2009, according to Brand Finance Plc.
“The IPL is a powerful new product in the sports industry and we will work hard to see USA Cricket and the IPL succeed together and energize the growth of cricket in our country,” Lockerbie said after the initial meeting.
The two organizations will meet again in May.
The bidders this weekend will include billionaire Venugopal Dhoot, chairman of Videocon Industries Ltd., which makes mobile phones and other consumer durables.
“It’s a good business proposal and I was also the captain of a college team and know how to handle the cricketers,” he said yesterday.
$1 Billion Net Worth
This will be the second attempt at an auction, initially scheduled for March 7. Bidders originally were required to have a net worth of at least $1 billion and to pay an advance bank guarantee of $100 million if they won. Modi dropped those requirements after several companies complained, he said on Twitter. He didn’t identify them.
Bids submitted before the auction’s original date included Dhoot; Gautam Adani, whose Adani Group owns ports and power plants; and Jaiprakash Gaur’s construction company Jaiprakash Associates Ltd., the Hindu Business Line reported.
Jaiprakash Associates spokeswoman Sunita Joshi and Adani Enterprises Ltd. spokesman Devendra Amin didn’t respond to calls seeking comment.
The IPL is fortified by the world’s second-fastest growing major economy, where gross domestic product may expand 8.2 percent in the fiscal year starting April 1, the Finance Ministry said Feb. 25. That’s up from an estimated 7.2 percent this year.
TV Revenue
It is modeled after major American sports leagues, where teams maintain membership regardless of performance -- unlike soccer’s English Premier League -- and share TV revenue, said Stefan Szymanski, a professor at Cass Business School in London. The IPL’s growth has come even as the league played last season in South Africa because of security concerns after the November 2008 terrorist attack in Mumbai.
“The IPL is structured in a way that should work economically for the owners,” Szymanski said. “The incentive structure of football encourages teams to invest beyond their means.”
The first IPL champion, the Rajasthan Royals, cost $67 million in 2008. Last year, actress Shilpa Shetty and her husband bought an 11.7 percent stake that valued the club at $140 million.
“This is probably the highest appreciation for any franchise in the history of modern-day sports,” Modi said.
Brand Finance, of London, increased the IPL’s valuation after Multi Screen Media Pvt., a unit of Tokyo-based Sony Corp., signed a nine-year broadcast deal before the 2009 season for a total of 82 billion rupees.
Fashion Show
The IPL generated $200 million in revenue in its inaugural year from streams including ticket sales, uniform advertisements and merchandising. Modi sold title sponsorships, named an official drinks maker and organized a fashion show.
The league’s YouTube page generated about 10 million views since its third season started March 12, according to the Web site. Advertisers include HSBC Holdings Plc, Hewlett-Packard Co., Coca-Cola Co. and Samsung Electronics Co. Ltd.
Teams use that money to pay some of cricket’s highest salaries. In a January auction, Ambani bid $2.5 million for Trinidadian Kieron Pollard, the NDTV 24X7 channel reported.
Former England national team captains Kevin Pietersen and Andrew Flintoff were acquired for $1.55 million each last year.
Ownership is more than about money, Szymanski and owners said. It brings increased brand awareness and membership in a display of the nation’s No. 1 sport.
“Everybody knew that India was cricket-mad and there was a potential for a commercial cricket competition in India,” Szymanski said. “The question was: Could you pull it off? Lalit Modi proved that you could.”
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