The IPL’s unveiling of its two new franchises on Sunday ended in an anti-climax with the league pushing back the entire process by two weeks, in the process scrapping the existing tender procedure after bidders objected to stiff financial clauses. The new tenders, which will be floated on March 9 and opened on March 21, will drop a clause requiring the bidder to have a net worth of $1 billion.
The new process will also amend two existing clauses: One will be a reduction of the advance deposit from $100 million to a $10 million “performance guarantee”, to be submitted 24 hours in advance of the bid being opened. Another original clause gave the IPL’s governing council the discretion to seek from the winning bidder 100% of the amount with a minimum time-frame; under the new process, the winning bids will be expected to pay 10% of their bid within 48 hours.
The minimum bid amount, however, remains the same at $225 million; the existing tenders were not opened at the IPL governing council meeting in Mumbai and were returned to the bidders.
“The relaxation [of the clauses] was because we received letters from many, many companies who had expressed interest but said that the $1 billion net worth criterion [was one] which owners of the existing franchises were not asked for earlier,” Lalit Modi, the IPL commissioner, said at a brief press conference. “So they asked why they were asked for the new criteria, which eliminates them from bidding, hence the clause has been amended to give more people the opportunity to bid.”
Sources told that the opposition came from within too – senior BCCI officials had objected to the radical revision of clauses from those of two years ago. It was a reversal of Modi’s stand that the high entry fee was a means of keeping away frivolous investors. “We put a high-end clause for entry because we need to get solid companies,” he had told on Saturday. “This business requires a long gestation period and that is the reason we want to secure ourselves. The BCCI always secures itself.”
The manner of the announcement – a public event scheduled to launch the next phase of the IPL’s remarkable success story – and the scale of the cutbacks in the clauses represent a departure from the usually sure-footed manner of the league’s workings and suggests that it had overestimated the viability of its terms and conditions for potential franchise owners. It also gave credence to the claim made on Friday by Priyadarshan, a film director, that the $1 billion clause was unviable and had put him off bidding for a franchise.
The atmosphere at the Four Seasons hotel in downtown Mumbai was already shorn of the usual bustle associated with any IPL event, given the boycott by the National Broadcasters’ Association (NBA), an umbrella group of Indian TV channels. Not even the surprise entry of Bollywood stars Saif Ali Khan and Kareena Kapoor could raise more than a muted reception.
Eventually only three bidders evinced interest: a consortium of Khan (son of former India captain MAK Pataudi), Kareena and her sister Karisma, Pune’s Panchshil group of industries and Venugopal Dhoot, owner of electronics manufacturer Videocon, who were bidding from Pune; the Adani Group for Ahmedabad and the Jaypee Group from a undisclosed venue.
“The reason given was that they unilaterally cancelled the bids,” Atul Chordia, chairman and chief executive of the Panchshil Group, said. “It is not the question of happiness about the previous terms. Whatever terms and conditions were there we abided by it, whatever the tender form asked for we gave it, we tendered. We gave the 100 million dollar bank guarantee.”
Chordia said he and the other investors in his group would be back to bid for the new tender.
The cities in the fray were Pune, Ahmedabad, Nagpur, Kanpur, Dharamsala, Vizag, Rajkot, Cuttack, Baroda, Kochi, Indore and Gwalior. The base price for the bid is more than four times the value set in January 2008, when the original eight franchises were auctioned. Other terms and conditions were similarly stringent – all bidders had to stump up a returnable deposit of $100 million before the bid, as against the $5 million (approximately) stipulated in 2008.