The Indian Premier League (IPL) is gearing up for its 14th edition and the unlisted shares of Chennai Super Kings (CSK) are buzzing again. CSK is Tamil Nadu based IPL franchise with its home base at M.A. Chidambaram Stadium, Chennai. Despite a forgettable season in 2020, CSK commands a brand value of about $60 million (435 crore INR) even in the Covid-19 hit year, as per the Brandirectory report.

The team has claimed the title thrice during its 11 tournament appearances. After serving a two-year suspension for the alleged involvement of the owners in a betting case, the Chennai based franchise kicked off again in 2018 and won the title in the comeback season.

Demerger from India Cements

In September 2014, The India Cements Ltd. approved demerger of Chennai Supers into a wholly-owned subsidiary by transferring its net assets at cost. Effective from 1 January 2015, about 94,000 shareholders of India Cements were allotted shares of Chennai Super Kings in 1:1 ratio, with a face value of Rs. 0.10. However, the proven multibagger of the unlisted space has never turned back since its comeback.

Life Insurance Corporation of India, Radhakishan Damani and Reliance Capital Trustee are amongst the key stakeholders in the company. IPL is the most viewed cricket tournament. Despite empty stadiums in recent edition held in the United Arab Emirates, the advertisement revenue and viewership has gone off the roof. According to TAM AdEx, IPL-13 had 115 advertisers and 249 brands, a jump of seven percent and three percent on a year-on-year basis.

Top E-commerce players contributed to 29 percent of advertisement volume. Even digital streaming is gaining momentum as Hotstar and Jio makes their way. Markets experts believe that revenue from advertisement, promotion and sponsorship is likely to increase from the upcoming edition as the economy is swiftly switching on to the recovery mode. Also, the valuation of franchise will undergo a hefty boost when the franchise will renew their contracts after the 15th edition of the multi-franchise tournament.

Financial Health

In FY 2019-20, CSK clocked revenue of Rs. 356 crore and Profit-after-Tax (PAT) of Rs. 50 crore, compared to Revenue of Rs. 417.83 and PAT of Rs. 111.2 in the fiscal year ago. EBITDA margins and Profit margins shrank to 21% and 14% in the year ended on March 31, 2020. The figure stood at 39 per cent and 27 per cent respectively.

Debt on CSK has remained constant since FY18 at Rs. 65 crore. However, net worth of the company has been constantly increasing, leading to reduction in Debt to Equity (D/E) ratio. The IPL team had a net worth of Rs. 175.85 crore and D/E ratio of 0.36. The company has not announced the Financials for FY 2020-21.

Plans for the future

It is highly anticipated that next edition of IPL will be a full house, spectator studded event in India. Thus, the gate money will not be wiped out, unlike the previous edition. Also, the team will have more time to strike more deals with sponsors to accelerate income. However, the franchise may have to pay higher bills for frequent travels, logistics and accommodation in different cities. Also, it has to share some revenue with BCCI and IPL authority as well. According to a report from Insidesport, Chennai Super Kings has roped in automobile manufacturer Skoda as their principal sponsor. The Czech car maker will pay a whopping Rs 75 crore ($10.2 million) for a three year deal to replace the Muthoot Group, who was paying Rs 65 crore ($8.9 million). However, the deal has not been announced officially. The 2021 edition of IPL is likely to be the last year where fans can see Mahendra Singh Dhoni, the flag bearer of legacy of the franchise since inception.

Retired from international cricket, it might be the last event when Dhoni, who will turn 40 this year, can be seen running on the 22-yards strip. The franchise would be keen on cashing on the same. CSK would be eyeing Steve Smith, former Australian Skipper, to strengthen middle order and lead the franchise, if Dhoni hangs his boots. Smith, a mercurial figure in cricket, may not fit in predecessors' shoes but the team has to go on. The mini auction will be held on 18 February 2021.

The way ahead?

IPL is expected to be a larger than life event in coming times. The BCCI and IPL governing council is pushing hard to add another team in the league. It has already been approved in the Annual General Meeting of IPL. If the existing plans are materialized, the number of matches are likely to increase, leading to more gate money and more scope for revenue from broadcasters. However, the teams are expected to spend more on the players in coming seasons. With more team bidding for the player going under the auction hammer, the purses are likely to swell in next mega player sale. It is likely that Vivo will pull out as title sponsor for this domestic sports fiesta. However, BCCI will board a big name soon to headline the event. A combination of sponsorship and media rights ensures that franchise will receive a hefty amount in coming years from IPL events.