Sun TV's Hyderabad IPL franchise expects to break even in second year

CHENNAI: The Kalanithi Maran-owned Sun TVBSE 3.34 % expects its newly-acquired Hyderabad IPL franchise to break even in the second year but not before incurring a likely Ebitda loss of Rs 25-30 crore in the first year, said a report by brokerage Enam.


The report said Sun expects an annual cash outflow of Rs 140-150 crore for the next five years in managing the as-of-now unnamed Hyderabad franchise, which it bagged last week in a BCCI auction after bidding Rs 425 crore for five years.

The forecast means Sun's franchise won't be too far from rivals such as Chennai SuperKings, which in 2012, coinciding with the fifth season of the IPL, fetched owner India Cements an income of Rs 137 crore.

The auction amount, paid yearly, constitutes the biggest expenditure component. Sun's bid amount for the Hyderabad franchise is roughly double of what Deccan ChronicleBSE -4.11 % had bid for in 2008, the inaugural year of IPL.

So those who entered the fray in 2008 - the likes of Chennai SuperKings and Mumbai Indians - pay far less as yearly fee than the later entrants. Sun's payout will still be only half of what Sahara bid for (about Rs 170 crore a year) in the heady days of IPL in 2010, which helped it bag the Pune franchise.

The Sun group CFO SL Narayanan had in an earlier interview with ET indicated that it would make ""solid profits"" from year three.

Of the projected Rs 145 crore cash outflow, Rs 85 crore would go toward auction payment, about Rs 40 crore toward player cost and the rest toward overheads such as stadium rent, event management expense, travelling and other admin expenses, it said.

It also listed possible revenue sources as media and sponsorship rights (50% revenue contribution), local sponsorships (25%), and ticket sales (25%). "While the deal will be EPS dilutive in the near term, we expect Sun TV to benefit in the medium term from synergies with its television and radio businesses," it said. Though Tamil is its bread-and-butter, Sun TV has significant presence in the Telugu language media market (for which Hyderabad is the hub) with a slew of TV channels and radio stations.

Enam also revised Sun's 2014 earnings estimate to Rs 20.3 a share from Rs 21 a share earlier and also its price target to Rs 366 from Rs 378 on the stock.
Sun TV's 2012 total income was Rs 1,847 crore, with profit after tax of roughly a third of that.