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According to dealers of unlisted market, the deal is likely to have a rub-off effect on CSK’s valuation and the stock price has already shot up as much as 20-30 per cent just in a few days and the sellers have stashed.
Before the deal, unlisted shares of CSK were trading around Rs 65-66 in the pre-IPO market, but the price rose to Rs 78-80 after the deal was inked by RedBird. At this price, the total valuation of CSK is close to Rs 2,100 crore.
Market sources said Rajasthan Royals is valued at $250 million (about Rs 1,850 crore). Emerging Media, the investment vehicle controlled by Manoj Badale and RedBird Capital Partners, on Thursday announced a strategic partnership.
Sunil Chandak, Equity Strategist of Mumbai-based Gennext Investrade, said the deal would have a positive impact on Chennai Super Kings, leading to its rerating as the brand value as the performance of the IPL franchise is superior to its peers.
“Unboundedly, CSK is the top notch franchise in terms of brand value, advertisement rates, merchandise sales and fan following. All these factors will add more value to the business,” he said. “If the buzz about its own stadium and cricket academy materialises, the franchise will unlock stupendous value for itself.”
The stock of CSK, the MS Dhoni-led multi-time IPL champion, has been a proven multibagger in the unlisted market. The stock has rallied some 600 per cent since it was demerged from India Cements, surging from Rs 12-15 in 2018 to Rs 77-78 so far.
Sandip Ginodia, CEO of Altius Investech, a Kolkata-based firm that deals in unlisted shares, said the deal would increase the value of the new franchises, which are yet to be auctioned. This will increase the value of existing and profit-making businesses, he said.
Ace investor and Dalal Street veteran Radhakishan Damani held 2.39 per cent (73,69,263 shares) in the company as of March 31, 2019. Life Insurance Corporation of India (LIC) holds 6.04 per cent.
“The deal is a strong signal that the base price of new franchises will be around Rs 2,000-2,500 and the bidding may take place even at higher prices,” Ginodia said. “The suspended season of IPL is likely to resume soon. We expect CSK share price to reach Rs 100 soon.”
In FY 2019-20, the Chennai based IPL franchise clocked a revenue of Rs 356 and profit after tax (PAT) stood at Rs 50 crore. However, the results and annual report for the financial year 2020-21 have not been made public yet.
“Redbird is no new entrant in the sports franchise business. It owns a stake in some of the global names in the sports entertainment business,” said Chandak of Gennext.
The Rajasthan Royals adds to a RedBird portfolio that includes a minority stake in Liverpool FC and baseball’s Boston Red Sox, the XFL, and the New York Yankees and Brooklyn Nets regional sports network, YES. It is also the majority owner of French football team Toulouse.
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