IPL LOSER DECCAN CHARGER ACTUALLY TURNED PROFITABLE LAST YEAR

The company has spun an EPS of Rs 30.9 for the period from 10 April 2008 to 22 January 2009.
Last year's Indian Premier League underdog was not exactly an underdog as far as the financials are concerned. Deccan Chargers Sporting Ventures, the firm behind the Deccan Chargers cricket team of Hyderabad at IPL, has turned in profits in the first year of formation. The firm, which is a subsidiary of publicly listed media firm Deccan Chronicle Holdings, has been recently put up for sale. KPMG is advising the parent on the sale. Around 20% stake in Deccan Chargers is held by Group M, the media arm of the ad conglomerate WPP.
According to a financial report( of VCCircle) of Deccan Chargers, , the cricketing company has spun an earnings per share of Rs 30.9 on shares having par value of Rs 10 each for the period from 10 April 2008 to 22 January 2009. That is not a bad thing since the team ended up at the bottom of the table in the debut edition of domestic 20:20 cricket tournament last year.
According to the financial report, the firm earned a total income of Rs 56.6 crore for the reporting period of which Rs 24 crore came as 'income from franchisee rights' while sponsorship fees brought in Rs 15.8 crore. Income from ads and ticket sales brought in another Rs 16.4 crore and there was other income worth Rs 40 lakh.
As against this, players' cost was pegged at Rs 22.7 crore. Operating and other expenses totalled Rs 13.39 crore and depreciation was at Rs 17.12 crore. The firm clocked PBT of Rs 3.15 crore and carried forward Rs 2.05 crore as PAT to the balance sheet.
Details for other teams of IPL is not in the public domain.
However, what is to be looked at is how the firm has funded the fee the firm would have paid to BCCI for the franchisee rights. The books show unsecured loans worth Rs 385.23 crore as amount payable to BCCI towards franchisee rights acquired last year. The franchisee rights were acquired by Deccan Chargers Sporting Ventures for Rs 428.04 crore.
DECCAN CHARGERS P&L:Income from Franchisee rights- Rs.24 cr.
Sponsership Fees- Rs.15.8 cr.
Income from ads & ticket sales- Rs.16.4 cr.
Other Incomes- Rs.0.4 cr.
TOTAL INCOME- Rs.56.6 cr.
Players Cost- Rs.22.7 cr.
Operating & Other Expenses- Rs.13.3 cr.
Depreciation- Rs.17.1 cr.
Preliminary Expenses w/off - Rs.0.2 cr.
TOTAL EXPENDITURE- Rs.53.4 cr.
PROFIT BEFORE TAX- Rs.3.1 cr.
PROVISION FOR TAX- Rs.1.1 cr.
PROFIT AFTER TAX- Rs.2 cr.
EARNING PER SHARE- Rs.30.9

FIXED INCOME INVESTING - BY BENJAMIN GRAHAM

I came across an interesting article on "fixed income value investing". A larger part of this text has been taken from Benjamin Graham's popular books - Security Analysis and The Intelligent Investor.

Two paragraphs I particularly liked :

1. "It's our argument that a sufficiently low price can turn a security of temperance quality into a sound investment opportunity - provided that the buyer is informed and experienced, and that he practices adequate diversification."

2. On the topic of diversification, Graham makes an interesting connection between investing and insurance. He notes that any individual security purchase may not prove profitable, even if the margin of safety is present at the time of purchase.

Graham says, "The margin guarantees only, that he has a better chance for profit than for loss - and not that loss is impossible. But as the number of such commitments is increased the more certain does it become that the aggregate of the profits will exceed the aggregate of the losses. That is the simple basis of the insurance under-writing business."

FINANCIALS OF IPL : A PERSPECTIVE

Alchemy released a report on the economics involved for teams participating in the IPL. I have heard a lot about franchisees overpaying for teams, players, rights ... and blaming BCCI for being non-transparent. Incidentally BCCI has itself called on franchisees to be patient and enjoy the fruits of their investment (read : ROI) after 3-4 years. Alchemy's report paints an optimist picture of the T20 cricket league and explains how much BCCI, the franchisees and supporting institutions (like Sony for media rights) tend to gain from the venture.Surprisingly, the report claims that an individual franchisee will be profitable from year 1 onwards , scoring an EBIT of Rs. 4 crores. A bulk of the revenue (Rs. 90.2 crores) will come from global media rights (Rs. 25 crores) a mere ten second commercial on Sony sells for at least $6000, supported by ticket sales (15 crs), lead sponsor (15 crs) and in-stadia advertising (10 crs). From the cost angle, the franchisee cost takes the wind out of the financials with a Rs. 40 crs charge followed by player acquisition cost (Rs. 24 crs). The assumptions have not factored a number of things like cost of capital, or financing of the acquisition cost, or trading of players etc. But the investment for Sony seems to have paid off, for this season alone they’re expected to make about fifty million dollars. These things happen a lot in soccer leagues around the world (Real Madrid finds it hard to survive until they have purchased the most expensive player in the world; am not sure where Jose Mourinho is headed but expect some big signings there too)The report has drawn a number of parallels between the English Premier League (with two clubs - Tottenham Hotspurs and Arsenal) and the IPL. Not to mention, a number of these EPL teams are also listed on the stock exchange. Manchester United was listed in the London Stock Exchange (1992) at GBP 47 million. In 2005, American businessman Malcolm Glazer acquired a controlling interest in the club in a takeover valuing the club at approximately £800 million (approx. $1.5 billion) .Perhaps, IPL is the alchemist's secret portion afterall !