Indian Premier League is celebrated no less than a festival in our country, the level of enthusiasm among the people for IPL is incomparable. To organize this sporting event, a lot of rich people, celebrities, big entrepreneurs and corporates have invested in it.
With the power-backed success of the Indian Premier League, several other professional sports leagues like the Pro Kabaddi League have emerged and franchises for the same are owned by large corporates and high net worth individuals.
In the present era, sports franchise has become a good investment perspective where the rate of return is high and there is scope for expansion of sports franchise in India. Sports franchises are basically bought by the following categories of investors:
- real estate people
- Entrepreneurs including individuals with huge net worth
- private equity investors
Investment by private equity investors in the sports world is on the rise and is a welcome move that offers investors huge opportunities for greater returns as well as helping in the growth, expansion and development of sports franchises. In India too.
Investment in sports franchises by private equity investors comes with the fear of building extensive private ownership structures and league rules still provide some set limits on the level of investment allowed by private equity investors. Investments made by private equity investors have increased manifold globally.
The private equity investment by CVC Capital (a leading international private equity firm) in the Indian Premier League is a major step towards creating a path for such investments in Indian sports, which will ultimately result in expanding the level of investment in the sport. There will be rapid growth and development of the game industry. The addition of two new cricket teams to the IPL is an example of increasing investment in sports franchises.
Why are private equity investors looking to invest in sports franchises?
- Private equity investment in sports franchising in India is a profitable method as the reach of sports in the country is very wide along with the vast swathe of population, where youth constitute a significant part of the country’s population.
- The association of media rights with sports leagues is very attractive, which is ultimately a profitable opportunity for investors due to their high valuations.
- The reach of sports programs is very wide as it is broadcast through TV, it is available on the top digital platforms available on affordable smartphones, which ultimately provides easy access to the masses.
- The level of craze and passion among people towards sports also proves to be a major factor for increasing the growth prospects of the sports industry.
Things to note:
It is to be noted that undoubted investment by private equity investors in sports franchises provides financial resources for such franchisees to grow and expand, but at the same time, it should be kept in mind that the investments made by such investors are purely are based on profit motive as well as the level of ownership structure also becomes somewhat rigid after such investment.
Several IPL teams have suffered adverse consequences in the past due to some controversies and controversies including financial differences.
Therefore, it should be ensured by the league regulators that an effective and transparent dispute resolution mechanism is in place in case any disputes arise between all the investor-owned franchises.
League regulators will also ensure that proper rules are drawn up and employed to manage conflicts of interest and promote smooth functioning of sports franchises.
From now on, investment in sports franchise by private equity investor is a welcome move, but such investments should be allowed after effective management plans, limits and regulations are put in place.
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