CESC was down 5.6%, Phillips Carbon 5% and Saregama dropped 5.3% at BSE during Wednesday trading
If stock market's reaction to Sanjiv Goenka lapping up the Pune franchise is anything to go by, equity markets are not too enthused about listed Indian companies getting into the Indian Premier League frenzy.
Investors are seeing it as an unrelated and risky diversification for Goenka's flagship firm CESC Ltd, which has steady cash flow from power distribution. Shares of CESC as well as other group companies like Phillips Carbon Black and Saregama took a beating.
CESC was down 5.6%, Phillips Carbon 5% and Saregama dropped 5.3% at BSE during Wednesday trading.
Sentiment towards the power utility firm turned negative on Tuesday during the close of the trading time when Goenka disclosed to the exchanges that New Rising Promoters, which won the bid for acquiring the Pune franchise for two years, is a subsidiary of listed entity CESC Ltd.
A press conference of Board of Control for Cricket revealed that Pune and Rajkot teams have been auctioned off through reverse bidding process, meaning it is the team owners – Goenka and Intex mobile owner Keshav Bansal respectively – who would be paying the BCCI and not the other way round.
While Intex is an unlisted, cash rich entity, CESC is widely traded.
Goenka's had also bought stake in Indian Super League's Kolkata franchise, Atletico de Kolkata. However, that investment was made from his personal wealth and jointly with partners like former Indian cricket captain Sourav Ganguly, Ambuja Neotia group head Harshavardhan Neotia and investor Utsav Parekh.
Market on Wednesday woke up to a research note by Antique Stock Broking, which termed the Pune IPL team buy as a negative development for the group estimating the possible cash outgo towards the team at Rs 100 crore a year.
While Goenka tried to assuage investors' concerns during the day, his ambiguous comments only added to the fear of investors with memories of how scrips like Indian Cements, Kingfisher Airlines and Deccan Chronicle suffered partly because association of the respective promoters with IPL.
Goenka's comments indicating that the IPL franchise might not remain a CESC subsidiary and could get transferred to some other company and that it's not CESC but another group outfit Phillips Carbon that might see cash outflows only added to the confusion. Goenka would be paying Rs 16 crore to BCCI for each of the two years of contract and he can additionally spend Rs 66 crore for buying team members.
Beyond these figures made available from BCCI, Goenka didn't comment much on the extent of cash outgo.
Antique's estimate of Rs 100-crore a year for the Pune team is close to what Intex would be reportedly spending, at around Rs 90 crore for the Rajkot franchise for buying players, marketing and branding, hiring stadiums, travel and lodging, and paying for support staff.
CESC owner explained that participation in the IPL would be a rewarding branding exercise but investors and analysts didn't buy that argument either.
"Except Spencer's, the group doesn't have any major consumer-facing business and spending such amount on brand building is devoid of logic," said an analyst.
){kind=small}
){kind=small}
){kind=small}
){kind=spacer}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Sanjiv")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}