Kalanithi Maran-controlled group jumps on the IPL bandwagon with a winning bid of Rs.85 crore per year.

The Kalanithi Maran-controlled Sun TV Network Ltd won the auction for the Hyderabad Indian Premier League (IPL) franchise on Thursday, replacing former owner, the financially strapped Deccan Chronicle Holdings Ltd (DCHL), which had its Deccan Chargers team scrapped by the Board of Control for Cricket in India (BCCI) because it was unable to furnish a Rs.100 crore bank guarantee by a 12 October deadline.

Sun won the franchise for the Hyderabad team with a winning bid of Rs.425 crore, or Rs.85 crore per year, for the next five seasons of the Twenty20 cricket tournament. However, the final lineup of the IPL could still depend on what the courts say.

To be sure, this is the purchase of a new franchise for a Hyderabad team and not the acquisition of the Deccan Chargers, which doesn't exist anymore after BCCI's cancellation of that franchise.

The move marks another significant expansion by Maran outside Tamil Nadu, where Sun TV?is a ubiquitous presence in television broadcasting and distribution, and shows the company's resilience despite the state government's moves against his business interests.

Earlier, in June 2010, Maran took over SpiceJet Ltd, India's second-biggest low-fare airline and his biggest venture outside the media and entertainment domain.

Maran will be looking to exploit the popularity of IPL?to leverage his business and media interests in Andhra Pradesh and elsewhere given the vacuum that will arise from the eclipse of the Deccan Chronicle group and the weakening of the Sakshi group, whose founder Jagan Mohan Reddy is battling the Congress government and corruption allegations.

Sun TV got a bargain compared with franchise prices two years ago and even a failed bid for Deccan Chargers just a month back.

"It's a steal, and cheapest compared with other IPL teams such as Sahara (Pune Warriors)?and (the now defunct)?Kochi," said K. Vijay Kumar, managing director and CEO of Sun TV Network. "We will be paying only Rs.85 crore (per year) for the next five years. We expect it to grow three times in valuation in the next five years."

Ashish Pherwani, partner with audit and consultancy firm Ernst and Young, said, "Sun already has a strong regional affinity. The IPL buy will serve as a platform to promote its pan-India products such as the DTH (direct-to-home) business and SpiceJet. It can use IPL effectively to build national brand recall."

Hyderabad is close to Sun's home base of Chennai and the IPL team will help boost the Sun brand, Kumar said.

Investors, however, weren't too enthused. Shares of Sun TV lost 3.46% to close at Rs.343.65 each on Thursday on BSE. The exchange's benchmark Sensex gained 0.26% to close at 18,758.63 points.

"The buying of Deccan Chargers means that Sun TV's margins and earnings will be diluted and that's why the shares are down," said a Mumbai-based analyst who tracks Maran's flagship company. "This will affect overall earnings, although the purchase will be a positive over the long term," added the analyst, who didn't want to be named.

An executive with an existing IPL team said, "Our estimate is that Sun will have to shell out around Rs.80 crore as operating cost, in addition to the Rs.85 crore it will give per year as its franchise fee to BCCI. It is tough to make money."

The cricket board had set the base price for the bid at Rs.60 crore per year for the next five years, Mint reported 19 October. Thursday was the last day for interested parties to submit bids for a new team.

The new franchise fee represents a premium of over 100% above the amount paid by DCHL for the Hyderabad team in 2008, BCCI said in a statement. DCHL had won the Hyderabad team for $107 million for 10 years.

"Sun group's promoters are credible players and we believe they will bring decent value to the IPL," said Rajeev Shukla, IPL chairman.

He said it's too early to say whether BCCI will add another team in the coming years to bring the team count to 10. With Sun TV's winning bid, there will be nine teams in season six of IPL, which will be held next summer.

Kumar didn't say why Sun TV hadn't bid for the Deccan Chargers team when it was put up for auction by its owners in Chennai a few weeks ago, if it was keen on Hyderabad.

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