Bids for the two new IPL teams unlikely to be too big

On Saturday, the eve of the big day for the Indian Premier League (IPL), answers to two relevant questions were not easily available. But there were quite a few guesses though.

The first and foremost question: How much will the teams go for? And the second: How many will eventually end up submitting the bids at 10 am on Sunday?

The answer to the second question seems a little easier than the first one as five parties, who had submitted the performance deposit of Rs46 crore on Friday, are in contention. What is also increasingly becoming apparent is the involvement of Shashi Tharoor. Sources in the Board of Control for Cricket in India say that one of the bidders is linked to the Union minister. It, is however, not known who is his bidding ‘partner.’ Videocon, Sahara, City Corporation, Adani and the minister-linked group are the five bidders. By late on Saturday night, at least four of the five parties involved in the process were believed to have landed in Chennai. Each one will have to submit the bid amount and city of their choice at 10 am on Sunday.

Now for the more important factor — the cost. Most of the parties involved aretightlipped over the matter but there are indications that the two successful bids are unlikely to breach the ceiling. This effectively means it’s unlikely that the bids will go for too much. But it is difficult to say how much is too much. But it is more or less certain that the bid is unlikely to go past $300 million.

Given the economics of the IPL, the new teams will have to wait for at least five to six years to break even. The base money of $225 million is 450 per cent more than the 2008 auction base price of $50 million. It is believed that only two of the existing eight teams have made profits since the conception of the league and two more may have broken even. In such a scenario, it is most likely that the winning bid will be around $250mn than around $300mn.

“Unless one party has a strong strategy in place to recover the investment, we cannot think of the bid going too high,” one of the contenders said. “The stakes are too high here,” he added.