Chennai: Sun TV Network Ltd is open to hiving off or selling its stake in Indian Premier League (IPL) cricket team Sunrisers Hyderabad, according to a top executive at South India’s largest media group.
The comments came after the IPL franchise posted a wider-than-expected loss in the first quarter ended 30 June and failed to live up to the group’s expectation of turning profitable in the third year of its operations.
“It looked feasible that Sunrisers will break even in three years but it has not,” S.L. Narayanan, group chief financial officer, said in a phone interview with Mint.
“We ourselves are disappointed.”
Narayanan blamed “external factors” for the IPL franchise’s dismal performance, including the fact that some matches were shifted overseas during the general elections. He declined to comment on when the franchise could stop making losses.
The real issue is that Sun TV has not been able to monetize local sponsorship for its IPL team and overestimated the revenue from this source, said an analyst who did not want to be named.
I am open to hiving off or even selling stake in the T20 team; however the board of directors will have to take the decision on this.
Narayanan said on a conference call with analysts last week.
The media group bought the IPL team for Rs.425 crore (payable over a five-year period, or Rs.85 crore a year) in October 2012 when the IPL governing council conducted fresh auctions for the team after its former owner, Deccan Chronicle Holdings Ltd, breached contract terms by delaying payments to players and mortgaging the franchise.At the time, K. Vijay Kumar, managing director of Sun TV, said he expected the team to treble in value in five years.
While the IPL team’s performance has still not started hurting the parent company, it will take another two years to be of some value to shareholders, said another analyst who did not want to be identified.
Sun TV Network, which also owns the largest broadcasting company in South India and radio channels across the country, said the IPL franchise’s loss widened to Rs.56.6 crore in the quarter ended June from Rs.43.4 crore in the year earlier. It is not just the IPL team that has been a cause of woe for the parent company.
Sun TV took a big beating in June when the home ministry denied security clearance to 33 television channels run by the company citing a pending probe against its promoters by the Central Bureau of Investigation and the Enforcement Directorate.
In the June quarter, one of its subsidiaries, South Asia FM Ltd, got an order from the Enforcement Directorate provisionally attaching certain assets worth Rs.266 crore and fixed deposits worth Rs.21.34 crore under the Prevention of Money Laundering Act, 2002 in connection with an investigation not directly involving the company. The management is challenging the order in court.
Earlier this year, Kalanithi Maran, and his associate company Kal Airways Pvt. Ltd sold their entire stake of 58% in low-fare airline SpiceJet Ltd to the airline’s former promoter Ajay Singh.
Source : Mint