IPL: Bigger than Zomato, Nykaa and Paytm?

Knock knock, who’s this?

It’s IPL, the game is on!

It ain’t no world cup, so players are in form!

Knock Knock, who’s this?

It’s IPL, it ain’t no Unicorn, it’s a decacorn!

Bigger than Zomato, Nykaa, OYO and so on!

To win the media rights, Viacom 18, Star have bid exorbitant amounts!

Sky high bids have made IPL a decacorn!

The poetic start may sound dramatic, but it is true, our very own IPL is a decacorn now. A report by D&P advisory valued it at more than 10.9 billion dollars! Its valuation is almost double that of Zomato ($5.5 billion), Nykaa ($4.98 billion), and three times that of Paytm, which is currently valued at $3.73 billion. 

Cool, isn’t it? A sports league bigger than some of the most prominent start-ups in India. Well, India’s love for cricket has made it one of the largest sports events in the world. The report also noted that the value of the IPL Ecosystem registered a 75% growth since 2020, not only that IPL has attained the decacorn status in just 15 years which is a rare phenomenon. 

Now you might be wondering,

How can we value a sports league and what are the business economics of IPL?
How did it manage to get a sky-high valuation?

How IPL makes money?

The IPL generates a huge chunk of its revenue through broadcasting rights and central sponsorship deals, which make up around 70-80% of the total income for the teams. The Board of Control for Cricket in India (BCCI) takes a 50% cut of the overall revenue, while the remaining 45% is split evenly among the franchises. The remaining amount is used in the prize money awarded to the top four playoff teams, with the ultimate champion cashing in the biggest share.

But the IPL's money-making machine doesn't stop there. The league also scores big with central sponsorships from companies that sponsor the tournament. For example, Tata paid the BCCI a whopping Rs 335 crore to be the title sponsor for the 2022 and 2023 seasons. And the IPL raked in over ₹300 crore from associate sponsorship deals with official partners, strategic time-out partners, and on-ground partners.

In addition to these sources of income, teams also bring in the bucks with team sponsorships, including exclusive deals with shirt sponsors, radio partners, and digital partners. IPL franchises partner with brands to increase brand visibility through logo placement on jerseys, headgear, and team kits. The larger the brand's logo, the more they must pay for the sponsorship opportunity. In addition to these logo placements, teams also generate income from marketing activities related to the tournament organized by their sponsors. It is estimated that sponsorship revenue accounts for approximately 20-30% of an IPL team's overall revenue.

Then we have revenue from ticket sales. Ticket sales at home matches (usually 7-8 per season) also contribute to the bottom line, with the home team owner taking home an estimated 80% of the revenue and the rest split between the BCCI and sponsors.

And let's not forget the extra cash earned from match-day food and beverage sales at the home stadium.

But it's not all about the money. Teams can also score some extra dough from official team merchandise like jerseys, hats, and other fan gear.

BCCI  team franchise auctions have become a major income source as the tournament expands and new teams enter the league. In 2021, the RP-Sanjiv Goenka group paid a whopping $940 million (₹7,090 crore) for the new Lucknow Super Giants franchise, while the CVC capital group splashed out $740 million for the Gujarat Titans. Talk about hitting a home run!

Moving to the next question, how what led to a huge increase in its valuation in 2022?

Two big things happened in 2022. First, the IPL sold media rights for 2023 to 2027 for a whopping USD 6.2 billion, which is a three-fold jump compared to the previous 5-year cycle in 2017. 

Following the latest auction, the value of the Indian Premier League has skyrocketed to three times its previous value at ₹48,000 crore. This means that franchises will receive a larger share of profits from the Board of Control for Cricket in India. Financial advisory firm Elara Capital predicts that the average revenue of all IPL teams will likely double within the next five years.

Second, two new teams (the Gujarat Titans and Lucknow SuperGiants) were bought for a combined staggering value of USD 1.6 billion, which caused the average price tag of a team to see a whopping 16-fold jump from its inception. 

These two factors were instrumental in boosting the valuation of the IPL and turning it into a "decacorn" (a company valued at over $10 billion). In fact, the IPL is now the second-largest sporting league (on a per-match basis from broadcasting fees) globally.

But don't get too excited. The report also stated that we shouldn't expect the same level of growth in the years ahead because the media and broadcasting rights are locked in for the next five years. Still, the IPL remains a festival for Indians and has grown by leaps and bounds in the last 15 years. And with all the money it's bringing in, it's not hard to see why!