IIFL Securities gung-ho on Chennai Super Kings as IPL hosts 10 teams

Jayesh Bhanushali, AVP- Research, IIFL Securities, believes that IPL has a very strong business model, comparable to the European football leagues. CSK is a good play for the growing new-age cricket culture in India, he said.

“IPL has a long way to go, and the IPL franchises have several sources of revenue ranging from broadcasting revenue, sponsorships, merchandising, advertising and ticket sales,” he added.

According to the report, Chennai Super Kings’ financial performance took a hit due to the Covid-19 pandemic. The net profit declined from Rs 111.20 crore in the fiscal year 2018-19 to Rs 40.26 crore in the fiscal year 2020-21.

The total revenue has declined from Rs 417.84 crore in 2019 to Rs 253.67 crore in 2021. The company’s EBITDA reduced from ₹163.75 crore in FY19 to Rs67.78 crore in FY21.

Not to forget that broadcasting rights are one of the major sources of revenue for the teams, and with the change in broadcasting rights in 2017, there has been a four times increase in it.

“The core income for the franchisees remain intact even if the teams underperform, but it rises if the team starts performing well, as the brand value starts increasing, leading to higher sponsorships,” Bhanushali of IIFL Securities added.

CSK started to trade at Rs 12 in the pre-IPO markets in November 2018, since its demerger with India Cements. The scrip zoomed 1,500 per cent to Rs 180 in January 2022. It has delivered a return of 165 per cent in the last year.

Chennai Super Kings is one of the most active counters in the unlisted space, which attracted a large number of investors in the past few years.

Ace investor Radhakishan Damani holds a 2.4 per cent stake in the company, whereas Life Insurance Corporation of India (LIC) owns over 6.04 per cent stake. Reliance Capital Trustee Company and The Boston Company are also among the top shareholders of the company.

Dealers active in the unlisted space have been bullish on the counter and believe that the latest auction of two new teams will rerate the entire IPL in the coming days.

Sunil Chandak, Equity Strategist at Gennext Investrade, said that the forthcoming media rights auction would be the next big trigger for the franchise and league.

“CSK is an established brand with a soundtrack record and deep-rooted legacy,” he added. “Its valuations should be higher than what it is currently commanding, considering the price of two new teams.”