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Tuesday, March 23, 2010


Dear (s)

Come March, salaried individuals would start thinking of bringing down their tax liability by somehow saving something in NSC, PPF, LIC, Infrastructure bonds and what not. Weeks earlier, a tender process was cancelled rumoured to be due to poor response, then bidding was conducted behind closed doors, lasted less than an hour as contenders barged into a plush hotel vying to buy at a base price of $ 225M, four times more than the rate two years back.

The bidding, conducted behind closed doors, lasted less than an hour after the contenders trooped into a hotel in Chennai. The base price for each team was $225 million, more than four times the rate at which the first IPL auction began in 2008. Bollywood stars Salman, Katrina, Saif, Kareena were all in the thick - can you imagine what it was ?

India has been one of the best performers in the world economy in recent years, but rapidly rising inflation and the complexities of running the world’s biggest democracy are proving challenging. There is widespread poverty in the Nation estimated to have a third of world’s poor. The per capita income is put at Rs.38000/- (in 2008-09). Per capita income is the measure of amount of money that each persons earns – i.e., notionally what each citizen is to receive if the yearly national income is divided equally amongst everyone.

In a recent meeting, our PM said that the economy would grow at 8.5% in the next fiscal year. An article in ET states that the country loses Rs 10 lakh crore from black economy every year. The news item adds that ‘While there are no authentic figures, economists feel that it is in the region of 40% of India’s gross domestic product (GDP). According to the latest estimate of Central Statistical Organisation (CSO), the size of the Indian economy is around Rs 61,64,000 crore. Thus, the size of the black economy, taking it at 40% of GDP, is around Rs 25,00,000 crore or around $500 billion.

The common man may not evince interest in all this – IPL 4 is to have two more teams and the amount of money splashed out at the auction would put not only the wealthiest of EPL teams to shame. Competitors vied with stash of money to gain entry in to an elite brand of clubs – Indian Premier League (IPL). For an non-existent brand – of two teams based out of Pune and Kochi, crores were the bid value. The recent auctions threw up huge surprise valuations defeating any talk of recession showing the faith in the potential of the brand enterprise. The two winners Sahara for Pune @ $ 370M and Rendezvous Sport for Kochi $333.33M have dwarfed many others including the Mumbai Indians Brand which was brought earlier at $ 111.9M (Rs.509 crores at that time). Those 8 teams together were traded at a whooping 2852 cr, now these two teams have cost Rs.3235 crores. The Kochi sponsor is a consortium brought together by suave Shashi Tharoor, the Union Minister. The minister famous for tweets, tweeted that he is not part but the group had his encouragement and blessings. The difference is marginally attributable to dollar fluctuation from 40 to 46. The two new teams will become part of IPL in the 2011 edition. The franchises will be valid for 10 years.

Certainly there is no recession for IPL but is it a bloated balloon ? these couple with audacious player bids, is it really worthy enough ? – questions to be answered by posterity.

Some ardent lovers of the game say that they do not evince in this form, especially with no allegiance to Clubs though somehow associated with States but TRP and other ratings keep proclaiming that the numbers are growing disproportionately. With plans to host the games in cine halls and with internet leverage, the spectator base is more to grow.

From an era where we rued advertisements in between overs, now virtually we have ads between balls. One form of making money. On the contrary another high definition service provider claims that one can watch game without advertisements by subscribing to their premium service. Clear paradox where advertisements and lack of them – both churn money. Sony Entertainment Television (SET) India together with World Sport Group which has the 10-year global media and production rights for IPL is all smiling after having winning the bid for $ 1.026 billion. According to a research report by Edelweiss, SET MAX is all set to reap a bonanza this time around with about Rs 700 crore in ad revenues as against Rs 500 crore in the previous edition, which translates into a growth of 40% year-on-year.

IPL is not just cricket. It is a lethal combination of sport, business, flow of money, pomp, marketing and politics.

In the first edition, not many of the franchisees earned profit. Still that has not deterred business houses like Videocon from being prepared to pump in $ 310 M and yet unable to clinch the deal.

Cochin does not have a ground ready to host the games, whilst the one in Pune is away from the city. When the State is reeling under power shortage, likely to worsen in summer, the matches are mostly day night affairs with giant equipments generating MWs of electricity.

The nation is going berserk and crazy.

An avid fan of the game – Srinivasan Sampathkumar.

PS: Not out of place to post here what I had shared with my friends through e mail  on 20/2/2008, immediately after the first IPL Auction.

Dear (s)
Sure you know what bidding is all about. An auction is a process of buying and selling goods by offering them up for bid, taking bids, and then selling the item to the winning bidder. In economic theory, an auction is a method for determining the value of a commodity that has an undetermined or variable price. In auction situations, traditionally, an object's value is determined by how badly someone wants it, rather than what it is intrinsically worth.
There are several variations on the basic auction form, including time limits, minimum or maximum limits on bid prices, and special rules for determining the winning bidder(s) and sale price(s). Participants in an auction may or may not know the identities or actions of other participants. Depending on the auction, bidders may participate in person or remotely through a variety of means, including telephone and the internet. Auctions are generally funded by a fee paid by the seller to the auctioneer or auction company.
What is being witnessed in India today is something which had never occurred before !!! Certainly, it is not CRICKET but trading of Players.Here is something on this billion-dollar news. It all started recently OR infact few months back to precise. Zee Group ambitiously launched Indian Cricket League (ICL) with a corpus fund of Rs 1 billion ($232.26 million) and a promise to field many international players. This was a private league running parallel to the existing cricket set up managed by Board of Control for Cricket in India (BCCI). They could rope in many recently retired cricketers, some promising Indian aspirants and some over the hill foreign players as well; which included the likes of Abdul Razaaq, Marvan Attapattu, Lara………. It was a Twenty 20 format of six teams and though the matches were somewhat intense they failed to generate the interest that it promised in the initial stages.
The Board was rudely shocked – it was not simply controlling the game but the vast money that was flowing to the coffers. They promptly banned the players contracted by the ICL stating the NATION INTEREST SHOULD STAND FIRST, MORE THAN ANY INDIVIDUAL INTEREST.Life has come a full circle. Now, it is BCCI at the wheels (of fortune) luring players with lucrative offers, which has made some current players think of terminating their careers and entering a contract for playing league in India.
On Sept. 14, 2007, BCCI launched the Indian Premier League reportedly the brainchild of the Vice president Lalit Modi. The league opens on April 18 and will see 59 matches spread over 44 days. In this big money game, overall prize money will be US $5 million, with the winners taking home $2 million. The remaining will be up for grabs in different forms, like man of the match awards and cash prizes. By contrast, the winners of the 2007 ICC World Cup in the Caribbean took home $1 million; the Indian team that won the World Twenty20 got half of that. TV rights have already gone for over $1 billion. Franchisees have already committed close to US $723 million. Top players are expected to earn minimum 1-2 crores per season. It was decided to have franchisees (8) who will run the teams in their own styles, bring their own sponsors and even name the team according to their choice. They will even be free to list their teams on the stock exchange. Some Corporates and some cine stars vultured on the prey and it ended with the following edging others out the others.
1) Vijay Mallya won the bid for the Bangalore team for $111.6 million.
2) Shah Rukh Khan won the bid for the Kolkata team for $75.09 million.
3) GMR Holdings won the bid for the Delhi team for $84 million.
4) Mukesh Ambani won the bid for the Mumbai team for $111.9 million.
5) India Cements won the bid for the Chennai team for $91 million.
6) Deccan Chronicle won the bid for the Hyderabad team for $107.01 million.
7) Emerging Media won the bid for the Jaipur team for $67 million.
8) Ness Wadia (Preity Zinta and Ness Wadia)won the bid for the Mohali team for $76 million, reportedly
For locals, the Chennai team is sponsored by India Cements and the team is named THE CHENNAI SUPER KINGS. Krishnamachari Srikanth who jocularly said that T20 was his cup of tea as he never lasted beyond that is the brand ambassador for the team while V B Chandrasekar is the official selector. The Chennai Super Kings team will play seven matches at MA Chidambaram stadium during April. The matches will be played under lights between 8 and 11 pm. Efforts are on to standardise the presentation of the stadium and an expert team from IPL inspected the grounds at Chepauk.
Once the Teams have been finalized, it is a tamasha of a different kind in selecting (!) the players. Today, is the day when Bollywood star amidst several Board Chairmans of Corporate world vied in bidding hundreds of thousands of dollars for the services of 77 star cricketers in a sporting auction never seen before in India. This is being held at Mumbai Hilton Towers in Nariman Point. The auction will be conducted by English auctioneer Richard Madley. Franchisees can spend up to $5million on their buys. Players will be contracted for three years.
Interestingly, Five players accorded “icon” status will not be auctioned. They will get 15 per cent more than the highest-priced player in their team. The icons are: Sachin Tendulkar (Mumbai), Sourav Ganguly (Kolkata), Rahul Dravid (Bangalore), Yuvraj Singh (Chandigarh) and Virender Sehwag (Delhi). Based on the lines of the NBA draft, the players have been divided into eight batches for the auction. Lots A, B, C and D are made up of top-rung players. Set E has wicketkeepers, F allrounders, G batsmen, and H bowlers. There are 25 Indians, 13 Australians, 11 Sri Lankans, 11 South Africans, 8 Pakistanis, 5 New Zealanders, 3 West Indians and one Zimbabwean on the list. Up for grabs first will be the marquee players from Set A: Shane Warne, Mahendra Singh Dhoni, Adam Gilchrist, Shoaib Akhtar, Mahela Jayawardene and Muttiah Muralitharan.
Currently, the highest grade retainership in the Indian cricket team is worth Rs 60 lakh. Per Test, a player gets 3.2 lakh and each ODI earns him 2.2 lakh. Assume Sachin Tendulkar plays 30 ODIs and 10 Tests in a year. This translates to a pay of 158 lakh (including the retainer but excluding bonuses, prize money etc) for 80 days of work. In essence, this means Tendulkar's pay per playing day is Rs. 1.975 lakh.
SO, when the clock struck 11 am, the floor was open for the start of the first ever cricket players' auction. Mahendra Singh Dhoni outshone the likes of Adam Gilchrist and Muttiah Muralitharan as the Chennai franchise of the Indian Premier League (IPL) made a whopping USD 1.5 million bid (approximately Rs six crore) to win the Indian one day captain. The Hyderabad franchise won Gilchrist with a USD 7,00,000 (app Rs 2.8 crore) bid, less than half of what Dhoni managed. The Chennai side also managed to rope in Sri Lankan off-spinner Muralitharan for USD 6,00,000 (Rs 2.4 crore).Retired Australian leg-spinner Shane Warne was bought by Jaipur for USD 4,50, 000, while Mahela Jayawardene will be seen playing for the Mohali team, which shelled out USD 4,75,000 for the Sri Lankan captain. Pakistan's enigmatic speedster Shoaib Akhtar was won by the Kolkata team for USD 425,000.
12:57 pm : Second round bidding results (figures in USD, base price in brackets):
Anil Kumble, Bangalore, $5,00,000 ($2,50,000)
Harbhajan Singh, Mumbai, $8,50,000 ($2,50,000)
Sanath Jayasuriya, Mumbai, $9,75,000 ($2,50,000)
Kumar Sangakkara, Mohali, $7,00,000 ($2,50,000).
Glenn McGrath and Mohammad Yousuf have gone back to the reserve pool as there was no opening bid for the two.
2:18 pm: Third round bidding results (figures in USD, base price in brackets):
Ricky Ponting to Kolkata, 4,00,000 (3,25,000)
Brett Lee to Mohali, 9,00,000 (3,00,000)
Andrew Symonds to Hyderabad, 1.35 million (2,50,000)
Daniel Vettori to Delhi, 6,25,000 (Delhi)
Matthew Hayden to Chennai, 3,75,000 (Chennai)
Brendon McCullum Kolkata, 7,00,000 (1,75,000)
Jacob Oram, Chennai, 6,75,000 (2,00,000).
Australian left-handed batsman Michael Hussey, who had a base price of USD 2,00,000, went unsold and has gone to the reserve pool, joining compatriot Glenn McGrath and Pakistan's Md Yousuf.
ANY OTHER VIEWS ??????????

With Regards - S. Sampathkumar.

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