Rahul Mehta (name changed to protect identity), a young entrepreneur and a sports enthusiast,bought a Mumbai-based polo club a couple of months ago. Recently, Rakesh Sharma (name changed), another businessman, purchased a football team based in Bangalore.
These two entrepreneurs are part of a growing tribe among the wealthy, who are looking to turn their interest in sports into a lucrative investment.
According to experts, team franchises, yatchs and horses are fast becoming the favoured investments in India.
“People started looking at sports as an alternative investment avenue after IPL (Indian premier league) was introduced. It was a fresh and innovative business model then for people. Initially, they may invest in sports out of passion and later it may turn into a profitable business too,” says Shitin Desai, executive vice-chairman, DSP Merrill Lynch limited.
“Usually only UHNIs (ultra high net-worth individuals), having a net-worth above Rs500 crore, tend to look at sports as a new investment. It requires huge capital, and they don’t look at percentage of returns, but instead, look at how many times their wealth can grow by,” says Rajev Sharma, country head at Unicon Wealth Management.
Apart from investing in cricket franchises and football teams, UHNIs have also found investing in polo clubs, sports academies
and sports properties interesting avenues to look at. Sports properties or merchandise include T-shirts, key-chains, shoes, bags and others on which famous sports personalities are flashed.
“After IPL caught eyeballs in India, people have invested in sports properties endorsed by Yuvraj Singh and Harbhajan Singh since the Indian youth holds a higher brand value for them,” added Sharma.
“People are investing to develop sports as a national asset by investing in ancillary sports such as sport cafe’s and institutes,” says Richa Karpe, director- investments at Altamount Capital Management, a family office which helps UHNIs manage their assets.
Usually, HNIs don’t declare their entire net-worth to wealth managers but investments in sporting activities are said to range anywhere between ¤10-50 crore according to those who have been involved in such transactions. The initial investment depends on the venture the person is entering into. The wealthy are being advised to stick to those sports investments that they would understand well (such as investing in a cricket franchise).
More exotic ventures such as a polo club may not be for everybody as it can be difficult to calculate a break-even period or expected rate of return.
“Depending on the venture a person can expect to break even in 3-5 years time, beyond which profits can start to come in,” said Desai of DSP Merrill Lynch.
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