The brand value of the Indian Premier League could take a beating unless the Board of Control for Cricket in India gives clarity to its future relationship with Vivo India following the “pause” in their relationship for this season.
A survey conducted by multinational financial consultancy firm Duff and Phelps last year had pegged the brand value of IPL at Rs 475 billion ($6.7 billion). Santosh N, managing partner at Duff and Phelps’ India advisors LLP, said Vivo’s pullout will have a “significant” impact on the valuation.
The BCCI is struggling to find a title sponsor which will offer half of Vivo’s Rs 440 crore pool per year in the current economic scenario. E-commerce and e-learning companies are in the race but a potential replacement still seems a far cry.
Both BCCI and Vivo confirmed the “pause” on Thursday. The 13th edition of the IPL will be held in the UAE and as reported by The Telegraph in Friday’s edition, “in-principle” permission has been granted by the home and external affairs ministries.
However, the hunt for a title sponsor remains the top priority since it directly affects the earnings of both BCCI and the franchises.
“This will have an impact on brand value of the IPL because Rs 440 crore was quite a meaningful cash flow to the ecosystem. But the question is will Vivo come back... If Vivo doesn’t come back then the Rs 200/300 crore we see for this year will be there for the next two/three years,” Santosh told The Telegraph.
“Even the valuation for 2023 could also happen on that or may be at a slight premium when the next renewal is due. That could mean a significant impact on the value. So a clarity is needed on whether Vivo will come back next year.
“If they come back, then IPL will have to do with 200/300 crore for just one year. On a league that is worth 6/7 billion dollars, may be 20/50 million dollars would not be such an issue.”
Santosh said the economic slump and the Chinese factor have to be taken into account.
“Of course there’s a slump since the Covid situation has impacted several industries. Second, when Vivo replaced Pepsico, the amount was significantly higher than what Pepsico had agreed. In fact, Pepsico pulled out in 2015 saying it isn’t making financial sense to them... The number was pretty steep but Vivo had business reasons to pay it.
“But if you start looking at companies which are not affected by Covid or do not have Chinese connections are a handful. That will be the challenge… It is not just about the economy but also the standoff between India and China,” Santosh said.
“I’m sure BCCI will reach out to a dozen companies. Also, one should get a visibility if this is a one-off thing or would I get a chance to continue. That’s the problem unless BCCI clarifies.
“Why would someone invest Rs 300 crore and associate itself for one-and-a-half months and have no clarity on the future. If it’s a three-year contract then I get visibility for three years, but if it’s one-off, I am getting only a two-month visibility. Why would anyone pay such an amount for a two-month visibility? So that clarity is important.”
