Buying your own sports team is one of the most exciting, but also one of the riskiest, investments of passion. An Indian billionaire shares the rollercoaster ride with Andrew Shirley
Mohit Burman is a mixture of nerves and excitement as we chat about cricket in a private members’ club in London’s Mayfair. And understandably so. In just a few days the latest player auction for the Indian Premier League (IPL), the annual 20 over, big-hitting cricket tournament that has revolutionised the game, is set to get under way.
This will be Mr Burman’s chance to bid for the players that he’d like to play for the team in which he holds the majority share, the Mohali-based Kings XI Punjab, over the next three years. If it were simply a matter of having deep pockets Mr Burman might be more relaxed – his family owns the Dabur group, one of India’s largest consumer goods companies – but that's not the case. In the IPL, rather like a fantasy football league, strict rules govern how much can be spent.
The owners of each of the IPL’s eight franchises have a total purse of US$10 million to spend at the auction. However, with the most in-demand Indian or overseas players commanding multi-million-dollar price tags – Royal Challengers Bangalore set a record by retaining India’s national captain Virat Kohli for US$2.7 million – it’s a balancing act to assemble a team that has sufficient local and international star-power to pull in the crowds and sponsors, but also enough depth to win games consistently. Teams can also only field four overseas players in any one game.
“You do need the names, but the trick is to identify up-and-coming young Indian players who willbe your stars of the future,” says Mr Burman, who co-owns the team with Bollywood actress Preity Zinta and Indian businessmen Ness Wadia and Karan Paul. He plays his cards close to his chest when I ask who he’ll be targeting at the auctions. “I’m going to discuss it with my co-owners and team manager and then we’ll decide who we want.”
Ultra-wealthy investment into sports teams is a growing phenomenon. According to the latest Billionaires Insights report from bank UBS, over 140 of the world’s top sports teams are owned by just 109 billionaires. The majority – 60 – are from the US, but 29 come from Asia, and Asian billionaires are behind over half of club acquisitions during the past two years.
I ask Mr Burman what’s behind the trend and why he got involved with cricket. “If you look at the US and the UK, rich people buying sports teams is nothing new, but now huge amounts of wealth are being created in other parts of the world it’s become much more global.” There’s also been a shift in social attitudes, he adds. “Previously it wouldn’t have been considered so acceptable to be seen spending a lot of money on a sports team, but that is changing now.”
Although most owners like himself are passionate about sport and love the thrill of owning their own team, nobody wants to lose money, says Mr Burman, who has been involved with the IPL since its inception ten years ago. “Of course I’m a huge cricket fan, but I definitely saw it as an investment when I bought my stake in the franchise. The team is run like any other business with a proper board and CEO.
“At the same though, I knew that it can be difficult to make money owning a sports team – I was well aware of what I was getting into. You shouldn’t invest money into sports that you can’t afford to lose,” he stresses.
Even though the IPL is now one of the world’s richest sports leagues, profits are not a given. “We lost money for the first seven years; it’s been a long learning process,” admits Mr Burman. “To begin with it was difficult to get sponsorship and initially some players and support staff assumed the owners didn’t care how much money they spent. It was easy for costs to spiral.”
Retaining sponsors can also be an issue, Mr Burman adds. “Everybody is chasing the same companies and generally there are no specific benefits for a sponsor to be associated with one particular team. There is a lot of brinksmanship that goes on when you are negotiating.”
The high point of Mr Burman’s IPL involvement came in 2014 when the Kings XI won the round robin league part of the competition, just missing out on overall victory despite scoring a highly respectable 200 runs. But even success doesn’t guarantee more money. “When you win games your players want to be paid more, although when they don’t do so well, the opposite certainly doesn’t apply,” he jokes.
Each team, for example, is allowed to retain three of their most valued existing players and strike individual deals rather than bidding for them in the three-yearly auction. But Mr Burman has let players go he would like to have kept because they asked for too much money. “You never know, I might get the chance to buy them for less in the auction.”
Other sports in India have tried to copy the success of the IPL model – Mr Burman himself has owned badminton and hockey franchises – but they haven’t enjoyed the same success. “There’s just not the domestic and international interest to make them work financially,” he explains. Even an equivalent football competition would struggle here, he says.
“Technology now means everybody can access every sport in the world, so why would they want to watch retired stars playing here when they can watch the world’s best players in the English Premier League? A 10 or 12-year-old kid wants to see world-famous teams and players.”
That’s not to say Mr Burman isn’t interested in owning a football team. He’s been asked to get involved with several English teams, but never felt confident enough to take the plunge. “Maybe one day the right opportunity will come along.”
At the moment, the main area he is focusing on is creating a marketing strategy to boost the revenue streams from the Kings XI. “The tournament itself lasts for just six weeks, which means we currently only have two to three months when people are really buying shirts and other merchandise.” Because players also move around every three years, it can be difficult to build up a long term fan base. “We need to think out of the box to extend that period and create more loyal supporters,” he explains.
Another option to make money from the IPL is to sell your stake in a franchise for more than you bought it for. Teams are now reportedly worth many millions of dollars more than when they were first auctioned. But Mr Burman says that’s not on the cards for him. “I’m not a seller.”
The IPL auctions take place several weeks after my chat with Mr Burman and literally a few days before The Wealth Report is about to go to press, but there’s just time to see which players will be joining Kings XI this year. Managed by Indian batting legend Virender Sehwag, it looks like the team is a potent mix of experience and youthful talent.
Punjabi hero Yuvraj Singh, who started his IPL career with the team, is back, joined by two of India’s current most exciting match winners, triple century-maker Karun Nair and ace spinner Ravichandran Aswin.
Big-hitting West Indian Chris Gayle brings some international stardust, while other overseas picks include IPL favourite South African David Miller and the in-form Australian trio of Aaron Finch, Marcus Stoinis and Andrew Tye. Mujeeb Zadran, the sixteen-year-old Afghani spinner, could be a potentially destructive signing if he fulfils his potential.
I email Mr Burman to wish him luck and ask how he’s feeling after the auctions. “We got most of the players that we wanted and I’m very excited, although of course still a bit nervous. But this definitely could be the year.”
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