How Much Are The Deccan Chargers Worth?

I’ve written on this topic before, but I remain just as clueless as ever: how much is cricket actually worth? The Deccan Chargers are up for sale, in part because its owners, the Deccan Chronicle, apparently can’t afford to pay some of the players’ salaries. The company paid roughly $100 million for the franchise in 2008, an astronomical sum that seems completely and utterly baseless. Here’s FirstPost:

“There are a lot of legal implications due to which we have not been able to take a concrete decision today at the meeting. The matter will again come up for discussion at a working committee meeting on September 15 in Chennai,” a senior working committee member told PTI.

 

What legal implications? Here’s Economic Times:

The fate of Deccan Chargers is intimately connected with the bigger problem of the owners, debt and problem-ridden Deccan Chronicle, as well as the priorities of the 28-member lenders group that includes the likes of ICICI, IFCI, Axis Bank and Tata Capital, who have between themselves lent Rs 3,000 crore to Deccan Chronicle.  […] Deccan Chronicle Holdings, the current 100% owner of the team, must first win approval from its board and the shareholders before the IPL side is separated from its fold. This process could take months to complete.

This isn’t to say that there aren’t prospective buyers. So far, a number of companies, including Videocon, have expressed interest, but have balked at the asking price — said to be close to $375 million. Imagine that — a company that buys a franchise and then reaps only losses wants to turn around and sell it at a higher price. But is the underlying product actually worth anything? Or are businessmen going solely on, “There has to be money in the IPL, because so many people watch it and it has the best players”? If that’s the case, what is the strategy — buy a stake now, and then sell, like the Chronicle folks?

So here’s a plea: all you business school folks, give me your best valuation model. How much would you pay for an IPL franchise?

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2 thoughts on “How Much Are The Deccan Chargers Worth?

  1. Golandaaz says:

    I would say the valuation part is the easy part isn’t it? I mean its a real business with real clients, real assets and revenue sources. How hard would it be to put a value on it.

  2. Nikhil Puri says:

    Interesting. First, like a true finance guy, I’d like to see their cashflows: How much money they’ve been able to generate since the franchise was first bought in 2008, and their growth since. Once you figure that out, you can put an idea as to what future cash flows from a franchise like this can be. Then, you probably have to attach the brand value, and the value of its assets (i.e. cricketers), assuming that those assets will generate cash in the future.

    The ultimate point being that how much you think the next guy will be willing to buy it for, from you. If you don’t see anyone buying it for a higher price, then you probably don’t want to pay $375 million right now.

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