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Investing at fever pitch in India's cricket bonanza Add to ...


A line of midriff-baring cheerleaders thrusts shimmering pompoms skyward under stadium lights as music blares and the crowd erupts after the home team scores another six points.

Glitz and glamour abound as the television cameras alternate their gaze between movie stars in the stands and the millionaire athletes on the field.

This isn't Monday Night Football. It's a cricket match featuring the Mumbai Indians against the Delhi Daredevils. Welcome to the Indian Premier League (IPL), the fastest-growing professional sports business on the planet.

How hot is the IPL? On Sunday, two new franchises were awarded after a feverish bidding process.

The $370-million (U.S.) cost of entry for a team based in Pune stunned even the league's founder and chairman. "I was expecting something in the range of $320-million, but this does come as a surprise to me. I keep reading about a recession. There is no recession for the IPL," said Lalit Modi, the 46-year-old scion of a wealthy Indian business family.

The new franchises in a league that has just begun its third season are already worth more than the Stanley Cup champion Pittsburgh Penguins; Forbes values Sidney Crosby and Co. at a relatively modest $222-million.

An investment in an IPL franchise has paid off handsomely for the Bollywood stars and Indian industrial magnates who bought teams when the league started.

Bollywood starlet Shilpa Shetty acquired an 11-per-cent stake in the Rajasthan Royals in 2009 in a deal that valued the team at $140-million.

That's more than double the $67-million the owners originally paid for the team.

India's largest private company, Reliance Industries Ltd., paid $111.9-million for the Mumbai franchise, an investment that has returned about 230 per cent in two years, based on bids for new teams.

Business experts in India say the soaring valuations are justified despite the fact that the league and most franchises have yet to turn a real profit.

Kishor Orstwal, managing director of Mumbai-based CNI Research, expects the value of an IPL franchise to rise to $500-million next year when two more teams are added, for a total of 12 clubs. That would make an IPL team more valuable than the most expensive NHL franchise, the Toronto Maple Leafs, which is worth an estimated $470-million.

Whether Canadians are crazier for hockey than Indians are for cricket is debatable. But with a population of more than one billion and a rapidly expanding middle class that is reaping the benefits of impressive economic growth, India clearly has the advantage when it comes to the size of the market.

"In India, cricket is religion. Seeing cricket is like praying to Vishnu," Mr. Orstwal said in an interview.

With a combination of Bollywood glitz, massive hype and a gigantic market, India has made professional cricket successful even though pro leagues in other countries have failed to thrive.

The IPL plays a version of cricket called Twenty20 that completes a game in three hours, unlike test matches that can last for days. Spectators can enjoy cheerleaders, music and plenty of refreshments at a game.

Despite the current lack of profits, initial public offerings could be next for the IPL's large-market teams, including Mumbai, Chennai and Delhi. Mr. Orstwal expects the first wave of league IPOs to come in the next two years.

The IPL is busy inking major sponsorship, licensing and broadcast deals. Indian real-estate giant DLF Ltd. is paying $50-million over five years to be the league's headline sponsor. Other five-year sponsorship agreements include a deal with motorcycle maker Hero Honda worth $22.5-million, one with PepsiCo worth $12.5-million, and a deal with beer and airline conglomerate Kingfisher at $26.5-million.

Japan's Sony Entertainment Television, together with World Sport Group, is paying $1.026-billion for global media rights for 10 years.

And the league is looking beyond India for its fan base. In January, the IPL signed a deal with Google to broadcast games live on YouTube. This season, matches are being broadcast in Britain on ITV4.

Mr. Modi has even more ambitious hopes for the league.

"IPL is going to become the world's biggest brand," he recently told India's Business Standard newspaper. "In any case, we are already India's most global brand."

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