Last year, Pune and Kochi IPL teams were auctioned - and they were sold for about $370M. These are new teams, not based in Metro cities, not having large home stadiums, no track record of performance, etc.
If these two teams are worth $370M, how much would a team like CSK be worth? It is based in a cricket mad city like Chennai, with a historic stadium of Chepauk as home base, excellent record in the IPL - having made semifinals of all 4 IPLs, finals of 3 IPLs, and have won the last 2 IPLs. This is possibly the only team that has pan-India support, because of Dhoni being the captain. Even Mumbai Indians with Sachin Tendulkar might not have as much pan-Indian support as CSK have.
With all these positives, let us assume CSK is worth $500M. You can be sure $500M is very conservative figure - considering that there will not be any more IPL teams (the schedule is already too strenuous), anyone who wants to buy an IPL team will be ready to pay top dollar to win a high performance team like CSK.
$500M is about Rs 2,250 Crore. India Cements, the owner of CSK has a market capitalization of Rs 2,500 Crore. Which means, if it was possible to unlock the value of CSK franchise, the rest of India Cements is worth just Rs 250 Crore!!
Of course, this is a simplistic calculation - because you have to factor in the debt as well to get the real Enterprise value of India Cements. But even if you factor in the debt, still the numbers are quite mind boggling.
It is really strange that this company is available at such a cheap valuation! They own huge amounts of land, profitable cement business, etc.
For some time there was massive uncertainty around the redemption of the FCCBs issued by the company. However, this was resolved on May 12th when the company announced that all the outstanding FCCBs have been redeemed/bought back. This is one of the companies that took advantage of the credit crunch in 2008/09 to aggressively buy back their FCCBs paying 45-50 cents on the dollar. While this hurt their balance sheets at that time, now this has proved to be a brilliant trade.
I hope India Cements spins off CSK as a separate entity, and sells 20% of this entity to the public in the form of an IPO. They will raise enough cash to clean up their balance sheets, plus there will be a valuation set for their remaining 80% holding. They can even make the shares attractive, by saying that shareholders would get priority for tickets for matches in Chennai, etc.
If they just do this one thing, the share price of India Cements will easily be double what it is today.
If these two teams are worth $370M, how much would a team like CSK be worth? It is based in a cricket mad city like Chennai, with a historic stadium of Chepauk as home base, excellent record in the IPL - having made semifinals of all 4 IPLs, finals of 3 IPLs, and have won the last 2 IPLs. This is possibly the only team that has pan-India support, because of Dhoni being the captain. Even Mumbai Indians with Sachin Tendulkar might not have as much pan-Indian support as CSK have.
With all these positives, let us assume CSK is worth $500M. You can be sure $500M is very conservative figure - considering that there will not be any more IPL teams (the schedule is already too strenuous), anyone who wants to buy an IPL team will be ready to pay top dollar to win a high performance team like CSK.
$500M is about Rs 2,250 Crore. India Cements, the owner of CSK has a market capitalization of Rs 2,500 Crore. Which means, if it was possible to unlock the value of CSK franchise, the rest of India Cements is worth just Rs 250 Crore!!
Of course, this is a simplistic calculation - because you have to factor in the debt as well to get the real Enterprise value of India Cements. But even if you factor in the debt, still the numbers are quite mind boggling.
It is really strange that this company is available at such a cheap valuation! They own huge amounts of land, profitable cement business, etc.
For some time there was massive uncertainty around the redemption of the FCCBs issued by the company. However, this was resolved on May 12th when the company announced that all the outstanding FCCBs have been redeemed/bought back. This is one of the companies that took advantage of the credit crunch in 2008/09 to aggressively buy back their FCCBs paying 45-50 cents on the dollar. While this hurt their balance sheets at that time, now this has proved to be a brilliant trade.
I hope India Cements spins off CSK as a separate entity, and sells 20% of this entity to the public in the form of an IPO. They will raise enough cash to clean up their balance sheets, plus there will be a valuation set for their remaining 80% holding. They can even make the shares attractive, by saying that shareholders would get priority for tickets for matches in Chennai, etc.
If they just do this one thing, the share price of India Cements will easily be double what it is today.