IIFL Securities, a domestic brokerage firm, has produced a report on Chennai Super Kings, an IPL team based in Chennai (CSK). The author feels optimistic about their business model.
According to Jayesh Bhanushali, AVP-Research at IIFL Securities, the IPL has a robust economic strategy that is comparable to European football leagues. He believes CSK is a natural fit for India's burgeoning new-age cricket culture. "The IPL has a long way to go," he noted, "and the IPL franchises have a variety of revenue streams, including broadcasting, sponsorships, merchandising advertising, and ticket sales."
"The IPL has a long way to go, and the IPL franchises have a variety of revenue streams, including television money, sponsorships, merchandising, advertising, and ticket sales," he added. According to the article, the Chennai Super Kings' financial performance has suffered as a result of the Covid-19 pandemic. Net profit fell from Rs 111.20 crore in the fiscal year 2018-19 to Rs 40.26 crore in the fiscal year 2020-21. Total sales fell from Rs 417.84 crore in 2019 to Rs 253.67 crore in 2021. EBITDA fell from Rs163.75 crore in FY19 to Rs67.78 crore in FY21. Not to mention that television rights are one of the key sources of revenue for the teams, and with the shift in broadcasting rights in 2017, it has increased fourfold. "The core income for franchisees remains the same even if the teams underperform, but it climbs if the team begins to play well, as the brand value increases, leading to higher sponsorships," Bhanushali of IIFL Securities remarked.
Since its demerger from India Cements in November 2018, CSK has been trading at Rs 12 in the pre-IPO markets. The stock increased 1,500% to Rs 180 in January 2022. In the previous year, it generated a return of 165%. Radhakishan Damani, a well-known investor, owns 2.4 percent of the company, while Life Insurance Corporation of India (LIC) owns about 6.04 percent. Reliance Capital Trustee Company and The Boston Company are also among the company's top shareholders. Dealers in the unlisted area are positive on the counter, believing that the recent auction of two additional clubs will rerate the entire IPL in the coming days. The upcoming media rights auction, according to Sunil Chandak, Equity Strategist at Gennext Investrade, will be the next key trigger for the franchise and league.
"CSK is an established brand with a solid record and a deep-rooted legacy," he continued. "Given the cost of two new teams, its valuations should be greater than they are now."