Valuation of Chennai Super Kings, a leading Indian

Premier League (IPL) franchise

By
Dhananjayan Jayabal,
Artha Capital,
Mobile - +91 9629474080
Email ID - dhananjayan@artha-cap.com
 Chennai Super Kings (CSK) Brief details
• Current Owner - Chennai Super
Kings Cricket Limited from 2015-16
• Previous Owner – India Cements
Limited from 2008 to 2015
• Year started – 2008
• Home Ground – M. A.
Chidambaram Stadium with
seating capacity of 50,000 seats
• Secondary Home Ground -
Maharashtra Cricket Association
Stadium, Pune with seating
capacity of 37,406 seats
• Principal Business - Indian Premier
League (IPL) cricket team based in
Chennai, Tamil Nadu
• Current Captain – Mahendra Singh
Dhoni
• Head Coach – Stephen Fleming
• Winning Record – 3 times
champion (2010, 2011 and 2018)
• Winning Percentage – 66.67%
Note – Team was suspended for 2 years in 2016
& 2017 alleged involvement of their owners in
the 2013 IPL betting case.

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 Cost of CSK franchise & its entitlements
Cost of Acquisition Revenue share from BCCI-IPL
• India Cements Ltd bought this CSK
franchise from BCCI-IPL committee for
• As per the agreement, BCCI-
Rupees 364 crore (US$91 million in IPL will share its income from
2008 at exchange rate of Rupees 40 at the sale of media rights and
that time) sponsorship income with all
• This amount was paid over 10 years i.e., the franchisees
Rupees 36.4 crore till 2017-18
Revenue Entitlements • Media Rights & Sponsorship
• Local Revenue - Franchise owners can revenue will be shared in the
earn in the following following ratios
• Gate Collections (ticket sales and others) • 20% to BCCI-IPL Committee
• Team Sponsorships • 8% for Prize Money
• Uniform Sponsors • 72% as franchise share
• Revenue from merchandising

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Historical Revenue reported for CSK by India Cements Ltd

Amt in Crore
FY March 2009 60.6
FY March 2010 77.4
FY March 2011 83.7
FY March 2012 137.3
FY March 2013 136.6
FY March 2014 166.2
FY March 2015 158.5

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 Revenue reported for CSK in FY March 2016
Amount in Crore
Central rights income 68.39
Sponsorship income 61.01
Gate collection income 20.08
Franchise income 21.02
Revenue from sale of products 0.44
Total Revenue 170.93

Source – From Chennai Super Kings Ltd’s MCA filing

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Payments to Foreign Players reported for CSK by India Cements

Amt in Crore
FY March 2009 10.1
FY March 2010 23.1
FY March 2011 26.0
FY March 2012 33.2
FY March 2013 30.5
FY March 2014 37.3
FY March 2015 39.6

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 Expenses reported for CSK in FY March 2016
Amount in Crore Miscellaneous Expenses 7.8
Cost of materials 0.2 Franchisee Fees 0.1
Employee Benefits 0.7 Sales Promotion Expenses 1.2
Players Fees 68.4 Canvassing Commission 1.2
Support Staff fees 10.2 Rent expenses 2.2
Players Expenses 0.4 Insurance 0.1
Support Staff Expenses 0.2 Rates and taxes 0.2
IPL Franchisee Fee Paid (Season VIII) 36.4 Telephone postage 0.0
Consultancy fee 0.2 Printing stationery 0.0
Repairs & Maintenance 0.0 Travelling exp 2.4
Office Maintenance 1.0 Legal professional charges 2.1
Compliments 8.2 Bank charges 0.0
Tournament Expenditure 6.8 Payment for audit services 0.0
Vehicle Hire Charges 0.0 Total 150.2

Source – From Chennai Super Kings Ltd’s MCA filing

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 Debt, Equity & Working Capital for CSK in FY March 2018

Amt in Crore
Share Capital 3.1
Reserves and Surplus 11.2
Net Worth 14.3
Current Liabilities
8% Optionally convertible debentures 65.0 Trade payables 99.0
Other current liabilities 11.6
Current Assets Short-term provisions 0.1
Trade Receivables 0.1 Total 110.8
Cash and cash equivalents 142.9
Short term loans and advances 31.2
Other current assets 15.3
Total 189.5

Source – From Chennai Super Kings Ltd’s MCA filing

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 Broadcasting Revenue Sharing from BCCI-IPL

Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23

No of franschise 8 8 8 8 8
Stars India for 5 years ₹ 16,320.00 3,264.00 3,264.00 3,264.00 3,264.00 3,264.00
Facebook - digital rights ₹ 3,250.00 650.00 650.00 650.00 650.00 650.00
Total 3,914.00 3,914.00 3,914.00 3,914.00 3,914.00
Franchise share 72% 2,818.08 2,818.08 2,818.08 2,818.08 2,818.08
Per Franchise share 352.26 352.26 352.26 352.26 352.26
Note – Previously, this franchise share of revenue from broadcasting was just Rs 36 to 40 crores. But
last year in 2018, Stars India had bided for huge sum of US$ 2.55 billion for 5 years against previous
bid of Sony for $1.03 billion for 10 years from 2008 to 2018.
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 Sponsorship Revenue Sharing from BCCI-IPL

Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23

No of franschise 8 8 8 8 8
Vivo 2,199.00 439.80 439.80 439.80 439.80 439.80

Total 439.80 439.80 439.80 439.80 439.80

Total Franchise share 72.0% 316.66 316.66 316.66 316.66 316.66
Per Franchise share 39.58 39.58 39.58 39.58 39.58

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 Ticket & Gate Revenue from Home Stadium

Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23

No of franschise 8 8 8 8 8
No of matches 7 7 7 7 7
Chepauk Seating Capacity 37,406 50,000 50,000 50,000 50,000
Average ticket price 1,000 1,000 1,200 1,440 1,728
Total ticket revenue 27.44 35.00 42.00 50.40 60.48

Total 27.44 35.00 42.00 50.40 60.48

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 Total Estimated Future Revenue
Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23
Central rights income 352.3 352.3 352.3 352.3 352.3
Sponsorship income (1) 85.4 93.9 103.3 113.7 125.0
Gate collection income 27.4 35.0 42.0 50.4 60.5
Franchise income from Sponsors 39.6 39.6 39.6 39.6 39.6
Revenue from merchandising (2) 1.0 1.2 1.4 1.7 2.1
Total Revenue 505.7 522.0 538.6 557.6 579.4

Note
1. This Sponsorship income is apart from IPL central sponsor’s share from BCCI-IPL committee. This is
sourced by the franchise itself by their own team. We assumed it to grow by 10% Y-o-Y
2. We assumed 20% growth in merchandising products sales

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 Total Estimated Future Expenses
Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23 Franchisee Fees 0.1 0.1 0.1 0.1 0.1
Cost of materials 0.5 0.5 0.6 0.8 0.9 Sales Promotion Expenses 1.3 1.5 1.6 1.8 2.0
Employee Benefits 1.1 1.2 1.4 1.5 1.6 Canvassing Commission 1.3 1.5 1.6 1.8 1.9
Players Fees 71.8 75.4 79.2 83.1 87.3 Rent expenses 2.3 2.4 2.5 2.6 2.8
Support Staff fees 11.3 12.4 13.6 15.0 16.5
Insurance 0.1 0.1 0.2 0.2 0.2
Players Expenses 0.4 0.5 0.5 0.6 0.6
Rates and taxes 0.2 0.3 0.3 0.3 0.3
Support Staff Expenses 0.2 0.3 0.3 0.3 0.3
Telephone postage 0.0 0.0 0.1 0.1 0.1
Consultancy fee 0.2 0.2 0.3 0.3 0.3
Printing stationery 0.0 0.0 0.0 0.0 0.0
Repairs & Maintenance 0.0 0.0 0.0 0.0 0.0
Office Maintenance 1.1 1.2 1.4 1.5 1.7
Travelling exp 2.7 2.9 3.2 3.6 3.9
Compliments 9.0 9.9 10.9 12.0 13.2 Legal professional charges 0.3 0.3 0.3 0.3 0.3
Tournament Expenditure 7.5 8.3 9.1 10.0 11.0 Bank charges 0.0 0.0 0.1 0.1 0.1
Vehicle Hire Charges 0.0 0.0 0.0 0.0 0.0 Payment for audit services 0.0 0.0 0.0 0.0 0.0
Miscellaneous Expenses 8.6 9.5 10.4 11.5 12.6 Total 120.2 128.6 137.5 147.3 157.8

Notes
1. Cost of Materials assumed to be 43% of the revenue from merchandising
2. All other expenses is assumed to grow at certain cost inflation by case to case

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 Estimated Income Statement

Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23

Earnings bef Interest & Tax (EBIT) 385.5 393.4 401.1 410.4 421.7
Finance Cost (8% on Rs 65 crore) 5.2 5.2 5.2 5.2 5.2
Earnings bef Tax (EBT 380.3 388.2 395.9 405.2 416.5
Tax @ 33.6% 127.8 130.4 133.0 136.1 139.9
Net Income 252.5 257.8 262.9 269.0 276.6

Note
1. Optionally convertible debentures of Rs 65 crore is assumed to be retained as debt forever.

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 Estimated Free Cash Flow to Equity (FCFE)
Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23
Net Income 252.5 257.8 262.9 269.0 276.6
Depreciation (1) - - - - -
Changes in working capital (2) (101.1) (104.4) (107.7) (111.5) (115.9)
Capital Expenditure (3) (10.0) (11.0) (12.1) (13.3) (14.6)
Debt raised / (repaid) (4) - - - - -
Free Cash Flow to Equity (FCFE) 141.4 142.4 143.0 144.2 146.0

Notes
1. As there is no fixed assets and there won’t be any need of it, it is assumed to be nil
2. 20% of total sales is assumed to be investment in working capital though the historical no in FY
March 2016 was just 8.6% (less than 10%)
3. As this is not capital intensive business, we assume a minimum of Rs 10 crore as capex and it is
expected to grow by 10% Y-o-Y thereafter
4. It is assumed that the company will not borrowCSKany money in future
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 Estimated Cost of Equity (Ke) for CSK

Implied Equity Risk Premium (1) 7.412%

Risk Free Rate (10 year Govt of India bond yield) 7.409%
Beta for CSK (2) 1.24
Ke 16.60%

Notes
1. Implied Equity Risk Premium for Indian business is calculated based on the SENSEX valuation. This is nothing
but the return expectation of any equity investors in Indian business over and above the risk free interest rate
generated by the 10 year Govt of India bond which is yielding currently 7.409%
2. Beta of 1.24x is calculated based on beta of Manchester United (currently at 0.62x). We assumed double the
time of its beta as cricket is not that universal like soccer. More over we don’t have public sport franchise
companies trading in the equity market. Hence double the time of Manchester’s beta for CSK
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 Discounted Cash Flow (DCF) valuation of CSK

Amount in Crore FY 3/19 FY 3/20 FY 3/21 FY 3/22 FY 3/23

Free Cash Flow to Equity (FCFE) 141.4 142.4 143.0 144.2 146.0
Terminal Cash Flow 1,321.7
Terminal Growth in Cash Flow 5.00%
Ke 16.60% 0.86 0.74 0.63 0.54 0.46
Net Present Value (NPV) 1,075.2 121.2 104.7 90.2 78.0 681.0
$ 155.47 million

Notes
1. Terminal Growth Rate - 5% terminal growth is assumed given the growth of fans base for cricket in India,
where it is worshipped as religion. It may be more than this 5% but conservatively, it is assumed at this rate

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 So what is Chennai Super Kings (CSK) worth?

CSK, given its success rate in this whole IPL and also its
consistent performance, it is worth nearly around
Rupee 1075.42 crore (US$ 155.47 million). This is
purely on the revenue potential of the franchise
without attaching any premium for owner’s ego factor
(or pride factor which is vital in these kind of sports
valuation where arms length buyers are very few in
the market)
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Thank you

For Details – Contact

Dhananjayan Jayabal,
+91 9629474080
Email – dhananjayan@artha-cap.com

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