Kalanithi Maran-owned media conglomerate Sun TV Network has won the Hyderabad Indian Premier League (IPL) franchise putting in the highest bid that was 23 per cent more than the second bid for the same team.
Sun bid Rs 850.5 million a year while the next bid was for Rs 690.3 million from PVP Ventures.
Sun will get to own the franchise for a period of five years till 2017 paying Rs 4.25 billion as franchise fee to the Board of Control for Cricket in India (BCCI).
Sun plans to invest in the region of Rs 1.3-1.4 billion in a year and bets on leveraging its popular television and FM radio stations to make a success of the newly acquired IPL property.
In an interview with Indiantelevision.com‘s Ashwin Pinto, Sun TV Network chief financial officer V. C. Unnikrishnan talks about what led the company to bid for the IPL team and how it plans to profitably run this new line of business.
Excerpts:
Q. Sun TV Network‘s bid at Rs 850.5 million was 23 per cent higher than the other bidder PVP Ventures. In hindsight, do you think you bid a bit higher?
We are comfortable with the price that we bid. Our strength is in the south market. Our ability to leverage the property on TV and radio is much higher. We are confident that we will be able to make money.
Q. How much does Sun plan to invest annually in the IPL property?
A. We know our franchisee fee amount but other expenses like the IPL players are not frozen yet. Our early estimate is that our spends would be in the region of Rs 1.3-1.4 billion a year. Even given that broad number, I don‘t think that making ends meet would be an issue for us at all.
Q. Does that mean that you will breakeven right from the start?
We expect to breakeven from the first year itself. The profits may be small but will grow as we go along. We have proven our track record when we have entered into other lines of business like movie production. The major difference between us and the other players is that we have stepped into different domains quite successfully. We have strength in other areas of entertainment. IPL is just another major area of entertainment that we have stepped into.
Q. For an IPL team franchise, there isn‘t much scope to drastically up the turnover. Will Sun stand to gain in valuation rise of this property say within the next three years?
Sun has a market cap of Rs 140 billion and ended on a consolidated revenue of Rs 18.47 billion for the fiscal ended 31 March 2012. We won‘t depend on the IPL to add sizeably to our top line growth. The big growth driver will be digitisation. For every broadcaster, digitisation will trigger big growth.
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‘We won‘t depend on the IPL to add sizeably to our top line growth. The big growth driver for us will be digitisation‘ |
Q. The IPL franchisee purchase will also lead to a confidence among the investment community that Sun is going to be aggressive in its media business despite all the recent controversies. Do you see the share prices getting corrected because of the new IPL team purchase?
The stock price getting affected is something of a market sentiment and perception. We were always very focused about our business. The IPL is a new line of business and we will draw in a lot of synergies. We are in the entertainment and media business. And cricket is entertainment.
Q. Why didn‘t Sun bid for the Deccan Chargers when it came up for auction under the aegis of the BCCI? Was Sun waiting for a clean IPL francise?
The BCCI came out with a tender. And we decided to participate in a direct offer.
Q. Will Sun‘s team consist of players from the Deccan Chargers?
We will take some players from that team. There are also some players that were not sold during the earlier auction but who have potential. We will look at them as well.
Q. How will this process of getting players work?
The BCCI has to decide on the modalities for the process and we will follow it. After the next season, the players go back for an auction.
Q. In terms of revenue many franchises still heavily depend on the central pool. How do you plan to grow the local revenue pool?
We have a clear business plan. It is too early to reveal details. But the business lines have been drawn.
Q. Only two parties including you bid. Was this a surprise?
It was a surprise. In the market the names of Videocon, Jaypee Group and Adani were floating.
Q. Is Sun TV looking at making a play in the sports broadcasting business?
We have no interest in entering the sports broadcasting genre. Sports channels are not profitable. That is why while we are present in a variety of genres, sports is an area that we have stayed away from. We are not interested in getting the telecast rights for any sports property. In any business decision, the aim is to make money.
