It is the second innings for you in the IPL. Your previous Pune team had failed to defeat Mumbai in the final a few years ago. According to the rumour mill, you have outbid so many including Kotak, Adani, the owners of Manchester United to buy the Lucknow team for a whopping Rs 7,000 crore. You have won a 20-20 team but you are going to have to show the mental fitness and physical fitness of a test player to actually make money.
I explained to you my calculation. It is a very simple economics based calculation that I did. Rs 7,090 crore is the enterprise value. Now what do we actually pay out to the BCCI? On the one hand, we pay out Rs 700 crore a year and on the other hand, we get revenues from BCCI. So Rs 700 crore will be the gross payment and the actual figure will be a net payment. In year one, that will be roughly about Rs 500 crore.
Year two onwards, that will be somewhere between Rs 250, 260, 270, 280, 290 crore. That will be from year two, three, four, five, six and then year seven, eight, nine, ten it will probably go down to about Rs 100, 150 crore. So on a net basis, net of the franchise revenue that we get from BCCI, the broadcast revenue, the sponsorship revenue of about Rs 1,800, 1,900 crore, the operational deficit will be some Rs 200-300 crore. So we are looking at a net outgo in terms of cash of about Rs 2,100, 2,200, 2,300, 2,400 crore. That is the cost of acquisition of an IPL team which also is spread over 10 years. No one is paying upfront.
Now take a pessimistic scenario and theoretically we get to a total figure of about Rs 3,000 or 3,100 crore. The net present value of that is Rs 2,200 crore. That is the way I look at it. CSK is already a unicorn. In three years, one is expected to become from one billion to at least one-and-a-half billion that is Rs 10,000 crore plus and that would be reflected in the valuation of all the franchises. So for a net investment of Rs 2,200-2,300 crore, if you get to a valuation of Rs 10,000 crore in four or five years, I would consider it a pretty good deal!
There will be costs involved in acquiring players, in brand building exercises, coaches, ground staff.
As I said, there will be an operational deficit as well and so when I look at the entire number of Rs 3,000, 3,100 core, it includes the payment I make to BCCI on a net basis plus the deficit that I have on the cricketing operations. It is a combination.
CSK is the richest IPL team. The IPL itself is, of course, one of the richest franchises in the world and was last valued at about Rs 50,000 crore. But you have unfinished business when it comes to the IPL. I was referring to the match which was lost to the Mumbai Indians. How are you going to ensure that it does not happen again and this time you bring the trophy home in Lucknow?
Well frankly losing any game is disappointing but what sport teaches you is that winning and losing is part of the game. So do not get too excited about victories and do not get too disappointed with losses. We lost to a better team, a team that played better in the final that time. Yes it was disappointing to lose but having said that, Mumbai Indians played better than us and deserved to win. So I have no regrets but of course, every franchise owner would hope to carry home the IPL trophy at some stage. That is my aspiration also.
Are you going to look for partners when it comes to the Lucknow team? Could we see that happen at all or do you want to be the sole owner?
I do not believe I am really cut for partnerships. No, I am not looking for partnerships at this stage.
You are not going to offload any stake, no joint ventures?
That option to offload stake over a period of time is always there. If the valuations become like 1.5 billion, 2 billion, then one can always evaluate that option three, four, five years down the road. But I am seeing it as a great investment, I do not see the need to divest anything at this stage.
So you want to be a team player on the field but not off the field. Who is the one player you would love to have on your team, which is like non negotiable for you?
No, no, no. Please understand that the BCCI will have a retention policy for existing franchise owners so whether they will allow three players to be retained or four or two I do not know but clearly the top several players will be retained by the existing franchise owners. So we will get the next lot of players. It is not about what I wish, it is about the pool that would be made available to us. We would have to choose from within that pool.
You have a brand Too Young which is endorsed by Virat Kohli. Your love for cricket is well known. Can I connect the dots?
Frankly I think you are seeing too much connection between the dots. Virat has already said as long as he plays IPL, he will play only for Bangalore. Virat is a friend. We do things together. We are partners in a couple of ventures and we have a great relationship but Virat is a committed Bangalore player. Rohit Sharma is a committed Mumbai player and MS Dhoni is a committed Chennai player. That is the reality.
The next big thing is of course supposed to be sports. Can you share with us some of the plans we might see from your team so that it becomes a money spinner like CSK?
The valuations for this franchise could clearly grow. We hope you will see some innovative marketing and branding from us but work needs to begin now. We have a team in place from our Pune experience and that team has to get on to working in the right earnest. We do not have too much time so they have to work 27/7 to give shape to our aspirations.
Unlike Pune, you are going to be from Lucknow this time. The state of UP can be the size of seven countries. Is that going to be a game changer of sorts?
I believe it can be. There is such a huge hinterland and there is no big sporting activity as yet which is housed in Lucknow. This will be the first time a sport like IPL will be played in Lucknow with Lucknow having a team can create a lot of emotional connect.
What are some of the lessons you may have learnt from your Pune experience which you will put to use in Lucknow?
That having a young team does not mean you are not capable of winning. In Pune, we had a very young team. We had players like Rahul Chahar, Washington Sundar, Deepak Chahar, Shardul Thakur all of whom are national level players today. They came to prominence initially with Rising Pune SuperGiants. One can build a fighting unit with a young team. That was a big learning and that is what we will try and see if we can redo.
What has also worked in the case of CSK and in a sense for Kolkata is the way they have given back to the city and the stadiums, in particular the infrastructure. Do you plan to do that too and how?
Well right now it is less than 24 hours since we have got the franchise. It is a little premature to talk about infrastructure and stadiums. But I am told that the Atal Bihari Vajpayee Stadium stadium in Lucknow is very good.
When you have done the math for us and made it sound like it is a sitting duck which can become a unicorn in almost no time, let’s look at the names that you were up against. What do you think clinched it for you? How did you calculate so differently that you were willing to bid Rs 7090 crore that may be an Adani or a Kotak or a Torrent or a Aurobindo or Bollywood Stars and Manchester United Team owners did not?
I do not know what they did and I do not know how they thought and frankly it is not for me to say. They are far senior to me in the field of business, they are far bigger than me. But I will explain to you the way I looked at it. I believe sports is a great area to be in for value creation. Today somebody buys a digital operation for Rs 10,000 crore and people applaud and say this will convert to Rs 20,000 crore; sports has not yet got that recognition but I believe that recognition is due for sports. I am very clear in the way I looked at it. Right or wrong, good or bad, that is the way I looked at it.
CSK is the only unicorn we really have right now from IPL. Have times changed and do you think that with the amount of liquidity out there, is it going to become easier and quicker to achieve the unicorn status?
Possibly but when you have financial characteristics, you are always conservative but that does not mean you do not aspire for it to happen earlier than.
Do you have a name in mind as yet?
No, not yet, it is too soon.
Do you have a coach in mind?
Too soon. There are a few names that come to mind but…
You have made a billion dollar bid without thinking all of that?
Well honestly for the coach there are few names in mind but it is very early thought. Nothing is conclusive yet, We have not initiated dialogue with anybody.
There will be two new teams that are entering now and just the way the cricket has been moving, do you expect the next IPL auction to be the biggest ever?
When you have an auction for 10 teams as opposed to eight teams, that is bigger but whether it will be the biggest ever or not frankly I have not looked at the history so I do not know. There will be a certain amount of retention by the existing franchise owners but almost everybody will have to get down to rebuilding a team. In that sense, it will be a big auction for sure.
Your bid is so aggressive and I am going to make this my final question. Why did you choose Lucknow and not Ahmedabad?
We have operations in UP. We distribute power in Greater Noida. The state of UP is a very important base for Spencer’s. We source a lot of our FMCG products from UP and we do believe it is a state that is starved for this kind of spot and we do believe the potential is large. It is the largest state in the country. It has a population that is crying for recognition in a way and so we do believe that opportunity is tremendous. Ahmedabad is a great opportunity but we are a little more familiar with Lucknow than with Ahmedabad.
Could there be synergies between your existing businesses there and the IPL team or it is going to be completely at an arm’s length?
There will be at arm’s length totally but that does not mean there will be no collaboration. There could well be but fundamentally all our units operate at the operational level at arm’s length but then there is an umbilical cord which is the shareholding.
Who is your most favourite player at the moment?
There are too many favourites I am not going to give any one name.