Research Report

Chennai Super Kings are a franchise cricket team based in Chennai, Tamil Nadu, India. CSK Limited is Playing IPL from the initial year of 2008, they served a two-year suspension from the IPL in year 2016 and 2017, and won the title in its comeback season of 2018. The team is captained by MS Dhoni and coached by Stephen Fleming. CSK is one of the most successful IPL franchises as they have the highest win percentage, they have won IPL title four times and Champions League Twenty20 in 2010 and 2014 CSK became India's first unicorn sports enterprise and brand value of the Super Kings in 2019 was estimated to be around ₹732 crore, making them one of the most valuable IPL franchises.

Revenues Model:

Central Pool: IPL central pool earned its revenue from 

-      -   selling media rights to broadcasters,

-       -   Title sponsor and licensing to co-sponsors,

-        - Bids and franchise fee from franchises and

-        - 20% of gate collection from all matches and official umpire sponsors.

-54% of revenue in the central pool was to be equally distributed amongst the franchisees till 2017. Thereafter 45% of the share is shared.

Highlights of Financial Performance:

· Revenue from operations has degrown at a CAGR of 22% from FY19-21. Degrowth in revenue is due to covid as there was no spectators allowed in stadium so there was no gate collection

· EBITDA Margin deteriorated from 38.1% in FY19 to 25.0% in FY21

· PAT has degrown at a CAGR of 40 % from FY 19-21, in FY 21 Company reported Profit of ₹ 402 million from ₹ 503million.

· Company reported ROE of 18.63% in FY 21.

· On consolidated basis company reported cash flow of ₹ 368 million and free cash flow of ₹ 320 million in FY 21.

Strengths:

· IPL did to cricket what La Liga and the English Premier League have accomplished in football. IPL still has long way to go as cricket is quite popular in India.

· IPL Broadcasting Rights revenue is the biggest source of revenue for IPL franchise, as broadcasting rights bid has increased 3 times, this is going to boost revenue for these companies.

· These companies are expanding their global presence by bidding in different league which will open up new source of revenue for these companies.

· CSK has very strong brand value because of its consistent performance.

Risks:

· One of the biggest negative about this business are that they are seasonal as most of their revenue come during IPL season only.

· Corruption in Cricket or change in policy by the government is the biggest risk with this business as they have faced two-year suspension in year 2016 and 2017.

 IPL Broadcasting Rights:

After a rigorous bidding war, The Board of Control for Cricket in India (BCCI) announced the winners of the IPL media rights for the period 2023-2027. At ₹ 48,390 Cr. IPL is now become the second most valued sporting event, right after United States’ National Football League (NFL) and has recorded a three-fold increase from what The Walt Disney-Star had paid at ₹16,347 crore in 2017. For the first time, the media rights have been spread across broadcasters, breaking the monopoly of one company. For instance, television rights for the Indian subcontinent have been sold for ₹ 23,575 crore to The Walt Disney Company India owned Star, while the digital rights have been bagged by Viacom18 for Rs 23,758 crore for 410 matches. This is the first time in India when digital rights have fetched more money than the television rights which shows the preference of viewers are changing from television to digital, where individual can connect anytime from anywhere. Viacom18 and Times Internet together won the Package D for ₹1,058 crore. While Viacom18 has Australia, New Zealand, Singapore, Caribbean, South Africa, Sub Saharan Africa, UK, Ireland and Continental Europe rights; Times Internet got Middle East and North Africa (MENA) as well as the United States region in their kitty. 

Revenue Breakup: The Biggest source of revenue for the IPL Franchise is Broadcasting Rights, so the BCCI auctions these rights and that auction money is shared between IPL teams, so in FY21 around 75% of CSK Revenue comes from broadcasting rights, second source comes from sponsorship rights which teams gets from sponsors like Muthoot Group was the lead sponsor of the team in FY21 around 24% of the income came from sponsorship Income. Remaining 1% of the income come from gate fees aur tournament related Income. Each franchise is entitled to a minimum of 7 home matches, which gives them a fair opportunity to generate money. The home team gets a fixed share of the total tickets sales and all IPL team owners earn money through the sale of tickets.

Brand value: Brand value adds a lot to the team. If you have star players like Virat Kohli and MS Dhoni in your team, you have a better chance of attracting the brands and investors, MS Dhoni Charisma has always been the reason why CSK is been the most loved team in IPL tournament, CSK performance has been very strong which also help in building strong brand image. Winning IPL or even making it to the Playoffs helps IPL franchises to boost their brand values. This, in turn, helps in easily getting brands on board – at prices that the owners demand. MI, CSK, and KKR, all of whom have won IPL more than once, top the Brand value.

Demerger from India Cement: The India Cement on 26.09.2014 approved a demerger of Chennai Super Kings IPL Franchise which was a wholly-owned subsidiary by transferring its net assets at cost. So, with effect from 01.01.2015, a new wholly-owned subsidiary will get incorporated. Every shareholder of Indian cement was given 1 share of CSK limited. India Cements had transferred its holding of CSK to India Cements Shareholders Trust with October 9, 2015, as the date fixed for allotment of the shares. The shareholders of the company were allotted a share each for every India Cements shares they owned.

Sponsors: The Principal Team Partner of Chennai Super Kings is The Muthoot Group, which had extended its contract with the CSK IPL team in 2018, until 2021. The Chennai Super Kings is sponsored by SEVEN, which is the official jersey partner of the team. SEVEN is owned by the skipper Mahendra Singh Dhoni who is the skipper of the team. Another sponsor of CSK is Gulf Lubricants. ACT Fibernet has been signed as the official internet partner of the team, alongside NOVA and iB Cricket, who are the digital media partners of the team. The radio partners of Chennai Super Kings are Hello FM and Fever FM. In 2020, ASAP has joined as the official energy partner for the team.

 Management of the Company:

Outlook: IPL value has jumped by 3x to ₹48,000 crore, which means franchises will get a bigger cut in profits from BCCI. For the next cycle of IPL 2023-2027, 10 teams will get on the battleground which include two new teams Gujarat Titans and Lucknow Supergiant’s, with the new team addition and increase in broadcasting rights it is expected that revenue of the company is expected to double and with covid slowing down it is expected that next year IPL will be held in India with full capacity, which is going to boost gate fees for IPL franchises. CSK brand value may take a hit after the departure of MS Dhoni as he was associated with the team from the starting. CSK as a company holds a lot of promise as franchise league is gaining traction in the country with digital broadcasting picking up and with two new team addition number of matches will increase which is going to boost revenue for this franchise. CSK hold good prospects going forward.