Kochi investors confident of 'viable' business plan

The buyers of the Kochi franchise have said that, despite what seems to be an "exorbitant" price paid to buy the IPL team, in reality the figure was far lesser when spread over the ten-year contract period. Rendezvous Sports World Private Limited, a consortium of five companies, bid US$333.33 for Kochi and was awarded the franchise on March 21.

"I know it seems we have paid an exorbitant price to buy the team but, if you look at the discounted value of what we are paying over the next ten years, it is not as high as it seems," Keshav T, one of the investors in Rendezvous Sports World Private Limited, said.

Going by the annual expenditure of the eight existing franchises, Kochi will have to shell out at least $33 million (10% of winning bid) annually. Keshav, representing Film Waves, one of five investors that form Rendezvous, said the valuations worked out internally suggested their investment would be secure. "The cost that we pay is based on the business plan, which we feel is viable," he said at a media conference arranged to discuss plans and reveal various members on the board.

It seemed like an entire cricket team was on stage as 12 people, representing various business groups, took their seats, making it difficult to understand who exactly held the controls of the Kochi ship. Shailendra Gaikwad, who runs the Rendezvous group, will be Kochi's chief operating officer and its public face. The engine room will comprise the five investors (see sidebar) based in different parts of the world, from Kerala to Dubai, with the operational base in Mumbai.

Keshav said, though was no long-term relationship of any kind between the partners, some, like him, had been doing business with Anchor Group for two decades. They had worked on the plan for the last six months before deciding to make the move. The seriousness of their intentions can be gauged from the fact that no one backed out of the deal despite the original tender process being cancelled and rescheduled from March 7 to 21. Back then the face of the bid was Jaypee Group, but two weeks later Jaypee decided to opt out, forcing the other partners to hurriedly re-organise things.

Doubts were raised about how the two new entrants - Rendezvous and Sahara Group (owners of the Pune franchise for $370m) - expected to recover their investment after paying a sum exceeding the combined value of the eight existing franchises. It remains unclear how many franchises have broken even yet but Keshav said Kochi would not be hindered by such fears because their goals were long-term. "We are there for the long haul and we don't expect to make profits in the first year. We have the capacity based on the business plan to sustain."

A more immediate worry would be the absence of big names in the auction pool for the fourth IPL, considering the original group of eight teams will have the advantage of retaining few of their best players - both domestic and foreign. Keshav admitted it was unfavourable but said they had to play by the rules. "The fact that teams will be allowed to retain some of their best players will reduce the availability for us," he said. "But we don't see that as a major issue. So we don't expect the best players to play for us in the first year but we definitely will try to hire the best."

When asked if it wasn't harsh on the two new franchises to miss out on buying the best players, especially when they had spent so much to buy a team, Keshav put a positive spin on it. "Not having the best players cannot be taken for granted at this point in time. There will definitely be opportunities for us to pick players. Already you have seen there are a lot of players who have come up, who have performed very well. So it is not necessary we need established or best players, we will try to get best composition."

Vivek Venugopal, representing the Elite and Cholayil group from Thrichur, the only Kerala-based investor, said the IPL had not "defined" any catchment areas. "There aren't any specific or defined catchment areas. The players who will not be retained by the eight original franchises will be up for the auction."