Inside the Hunt: Who Will Claim RCB’s $2 Billion Franchise?

The search for investors spans not just one but two IPL franchises. The Royal Challengers Bengaluru’s pursuit is well-publicized, with another franchise likely considering selling a stake, potentially a minority one. With IPL team management costs rising significantly, there’s been a long-standing hope for new investment.

The current focus is on RCB’s hunt for buyers. Reports suggest that six parties have expressed interest, should Diageo Great Britain, RCB’s parent company, choose to sell. However, there is uncertainty among Indian parties about Diageo’s intentions.

Despite suggestions that shareholders are unhappy with holding an IPL team, a non-core asset, there is a belief that the British liquor company might reconsider selling at the last minute.

Several Indian and American entities have engaged in discussions with Diageo’s management. Notable interested parties include Adar Poonawala of Serum Institute and Parth Jindal of the JSW Group. The Adani Group and a well-known Delhi-based business tycoon with diverse interests are also reportedly enthusiastic about the purchase. In addition to these, two US-based private equity firms are exploring options.

The Poonawala family has shown prior interest in IPL teams, with Adar’s father, Cyrus, having invested in ITT during IPL’s 2010 expansion. Although the Pune and Kochi teams from that expansion didn’t last, Adar sparked conversations by expressing interest in RCB on X, suggesting potential collaboration with an American investment firm.

If the Jindal Group, which owns 50 percent of Delhi Capitals, decides to bid for RCB, they will need to disassociate from DC. The Adani Group’s IPL interests are noteworthy, as they narrowly missed acquiring the Ahmedabad team in 2022 when two new teams were auctioned.

The primary factor influencing the sale is valuation, with Diageo reportedly asking for USD 2 billion. Opinions vary on whether an IPL franchise warrants such a cost. Future media rights projections, crucial in establishing franchise value, will soon be up for bidding. The last cycle’s competition between Star and Jio, now merged, raises questions about future exponential value increases.

JioStar’s announcement of exceeding 500 million subscribers poses a significant valuation aspect. If IPL subscriptions are priced at INR 100 monthly, potential earnings could be INR 50 billion each month. Given IPL’s potential span of four months and 96 matches, subscription revenues could reach INR 20,000 crore or USD 2.3 billion in a single season.

Over five seasons, broadcasters might earn more than USD 10 billion solely from subscriptions, plus INR 5000 crore in advertisement revenue, adding another USD 2.5 billion over a five-year cycle. The latest media rights were valued at about USD 6.3 billion, with potential growth by 2027.

Diageo has reportedly appointed Citi and another bank to advise on the sale, though the transaction remains uncertain due to potential objections from Diageo’s India division. Key officials recently traveled to the UK for further discussions.

Beyond valuation, unresolved issues like the June 4 tragedy case could impact RCB’s sale, with new owners expected to handle these matters. Additionally, uncertainty surrounds Bengaluru’s M. Chinnaswamy Stadium, a previously prime cricket venue, since the stampede incident. More clarity on the franchise’s future is anticipated soon.