IPL franchise bids to be opened on Thursday

The Indian Premier League, the BCCI-backed Twenty20 tournament, continues to gather steam - the eight cities in which the teams are to be based will be revealed when the bids for the franchises involved are opened on Thursday.

A clutch of corporates are in the race to own a team in the tournament, which is slated to begin on April 18. Besides business houses such as Reliance Industries Limited (RIL), India's largest private sector company, the Videocon group, a US$2.5 billion conglomerate, the UB group, the Hyderabad-based infrastructure major GMR, real estate giant DLF, media group Deccan Chronicle, and fast food chain Nirula's, Bollywood star Shah Rukh Khan and London-based betting firm William Hill are reported to be interested in owning a team.

Videocon chairman Venugopal Dhoot, whose group is bidding for the Delhi and Mumbai teams, was enthusiastic about the prospect of becoming a franchisee. "It's a great brand equity," he told the business daily Mint. "We see it as having great valuation."

The revenue streams for franchises include media rights (80% for the first two years, gradually tapering to 60%), IPL sponsorship money (60% for ten years), gate receipts, franchise sponsors and uniform merchandising. "Our clear focus in designing the league has been to maximise the value of the team owners," Balu Nayar, the managing director of the International Management Group India, the sports management and marketing firm working with the BCCI on IPL, told Business World.

The base price for owning a team for ten years is US$50 million, but the intense competition and the fact that a large chunk of revenues from IPL's lucrative media deal with Sony Entertainment and WSG will accrue to franchisees is likely to see much higher bids than the base price.

Twelve cities satisfy the BCCI's eligibility criteria - including having a stadium with floodlights and at least 25,000 seats - for hosting a franchise but the IPL is to initially have only eight teams. The twelve cities in the running are: Ahmedabad, Bangalore, Chennai, Cuttack, Gwalior, Hyderabad, Jaipur, Kanpur, Kolkata, Mohali, Mumbai and New Delhi.

"The choice of cities is based on market forces," Nayar told Mint. "Cities having the highest value will be selected." Bidders are not allowed to own more than one team. The IPL hopes to grow the eight franchises to 16 by 2010.

The player auctions are expected to be held around February 7, when the franchises can choose from a pool of at least 78 players with international experience the IPL has signed on. Shane Warne is the most expensive player, costing US$400,000 for one year while the next highest fee, of US$350,000, is for Glenn McGrath and Stephen Fleming.

The IPL, sanctioned by the International Cricket Council, is a Twenty20 competition whose inaugural season will feature eight franchises participating in a 59-game season. Each franchise will play the others on a home-and-away basis, with the top four sides going through to the semi-finals.