Breakeven

BREAKEVEN ANALYSIS OF KKR

Submitted by

Ankit Mishra – 91121

Ayushman Roy Choudhary – 91128

Dinesh Joshi – 91131

Priyansh Sharma – 91148

FACTS

• IPL is a professional Twenty-Twenty cricket league, launched by Board for Control of Cricket in India (BCCI) and has the backing of International Cricket Council (ICC). IPL is chaired by Lalit Modi, the Chairman & Commissioner IPL, BCCI Vice President

KOLKATA KNIGHT RIDERSOWNER• Red Chillies Entertainment(Shahrukh Khan, Gauri

Khan, Juhi Chawla and Jay Mehta)• FRANCHISE VALUATION: $ 75.1 m

CALCULATION OF BREAK-EVEN

EXPENSES:• The Franchise expense can be broadly divided into

three.• Firstly the franchise fees which the franchise has to pay

every year i.e 1/10th of the auction fee.• Second comes the expense on Team, which includes

team management expenses, player salaries etc.,• Lastly all the promotion and administrative expenses

which the franchise has to do to promote their franchise and make it a brand and win a large fan base.

Cont…

REVENUES:• IPL team owners have two channels of

revenue, central and local.• Central - Includes Media, sponsorship and

suppliers, which BCCI shares with the teams.• Local - Includes things like stadium ticket sales,

local sponsorship. Concessions, merchandise et al, which franchisees will be responsible for selling

BREAK-EVEN OF IPL1REVENUE AMT (Crores) EXPENSE AMT (Crores)

BROADCASTING 35 FRANCHISE FEE 31

TEAM SPONSORS 34 TEAM EXPENSE 25

GATE RECEIPTS 20 PROMOTION 20

TOTAL REV 89 TOTAL EXP 76

BREAK –EVEN POINT OF KKR:

• NET PROFIT = TOTAL REVENUE – TOTAL EXPENSES NET PROFIT = 89 – 76 =13 CRORES• Here, franchisee fee = 31crores = Fixed Cost• As seen KKR’s revenues are greater than

expenses. KKR has earned profits. Therefore there is a break-even point at which revenue is equal to expenses. The total expense is 76crores. When revenue is 76crores there is a break-even point.

• Break-even point is at 76crores

BREAK-EVEN OF IPL2REVENUE AMT(Crores) EXPENSE AMT (Crores)

BROADCASTING 41 FRANCHISE FEE 31

TEAM SPONSORS 23 TEAM EXPENSE 25

GATE RECEIPTS 4.8 PROMOTION 12

TOTAL REV 68.8 TOTAL EXP 68

BREAK –EVEN POINT OF KKR:

• NET PROFIT = TOTAL REVENUE – TOTAL EXPENSES• NET PROFIT = 68.8 – 68 = RS.80 LAKH• Here, Franchise Fee = 31crores = Fixed Cost.• As seen KKR’s revenues are greater than

expenses. KKR has earned profits. Therefore there is a break-even point at which revenue is equal to expenses. The total expense is 68crores. When revenue is 68crores there is a break-even point.

• Therefore Break-even point is at 68crores.

FORECASTING BREAK-EVEN OF IPL3

FACTORS :• IMG DEAL.• BRAND EQUITY OF KKR• REVENUE FROM GATE RECEIPTS

IMG DEAL

• IPL tournament format copyright with IMG• If the deal continues- Team expenses will not

be affected• If the deal is called off- it will effect

breakeven

Break even point may or may not be reached

Team expenses increases

Tournament duration increases

BRAND EQUITY OF KKR

• The valuation is done by Brand Finance which has done other valuations for Indian companies.

• Brand valuations of the IPL teams : • Kolkata Knight Riders – $42.1 million• Mumbai Indians – $41.6 million• Rajasthan Royals – $39.5 million• Chennai Super Kings – $39.4 million• Delhi Daredevils – $39.2 million• Royal Challengers Bangalore – $37.4 million• Kings XI Punjab – $36.3 million• Deccan Chargers – $34.8 million

Cont….

• Highest TRP for Kolkata knight riders in IPL 2.• Financially, the Knight Riders were easily the most

successful franchise in the IPL 1, achieving a profit of Rs. 13crores and Rs. 80lakh in IPL 2.

• At this moment KKR is the richest team in all the eight franchisees

• Chances of Sourav Ganguly returning as captain• EFFECTS: KKR doesn’t need to increase its promotion budget

REVENUE FROM GATE RECEIPTS

• Since IPL2 was held outside India , the revenue earned from gate receipts was very less. This year it is expected to increase. IPL3 will be staged in India, so the revenue from gate receipts will increase compared to IPL2.

• Using the conservative approach we are using the data of gate receipts from IPL1, even though there is chances of ticket prices increasing in IPL3

BREAK-EVEN OF IPL3 (IMG deal called off)

REVENUE AMT (Crores) EXPENSE AMT (Crores)

BROADCASTING 41 FRANCHISE FEE 31

TEAM SPONSORS 23 TEAM EXPENSE 30

GATE RECEIPTS 20 PROMOTION 20

TOTAL REV 84 TOTAL EXP 81

BREAK-EVEN OF IPL3 (IMG deal exists)REVENUE AMT (Crores) EXPENSE AMT(Crores)

BROADCASTING 41 FRANCHISE FEE 31

TEAM SPONSORS 23 TEAM EXPENSE 25

GATE RECEIPTS 20 PROMOTION 20

TOTAL REV 84 TOTAL EXP 76

BREAK –EVEN POINT OF KKR

• NET PROFIT = TOTAL REVENUE – TOTAL EXPENSES• NET PROFIT = 84 – 81 = RS 3 crores (IMG deal

called off)• NET PROFIT = 84 – 76 = RS 8 crores (IMG deal

continues)• Here, Franchise Fee = 31crores = Fixed Cost.Here we have increased the Team expenses by 20% Because the tournament duration is expected to

increase by 20%

Thank you