Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,913.455.3
Stock Analysis, IPO, Mutual Funds, Bonds & More

United Spirits earns over 10% of operating profit from cricket in FY19

Royal Challengers Bangalore rakes in moolah for United Spirits despite a poor IPL.

, ET Bureau|
Jun 07, 2019, 07.14 AM IST
0Comments
BCCL
11
A year ago, RCB had contributed just 3% to USL's operating profit.
MUMBAI: United Spirits, the country’s biggest liquor maker, earned more than 10% of its operating profit for the last fiscal year from cricket even as its team Royal Challengers Bangalore languished at the bottom of the popular Indian Premier League twenty20 cricket tournament.

RCB’s revenues more than doubled to Rs 313 crore in the year ended March 2019 while its earnings before interest, tax, depreciation and amortisation (Ebitda) increased 431% on year to Rs 146 crore, the Indian unit of the world's largest distiller Diageo said. However, last fiscal's numbers included part of revenues and profitability for this year’s IPL season 12 as well because the tournament kickstarted early, on March 23, this year. Excluding the latest season of IPL, RCB had revenue of Rs 260 crore and an EBITDA of Rs 123 crore.

Sanjeev Churiwala, chief financial officer at USL, said RCB made a few strategic shifts which helped RCB boost the revenues. It recorded “exponential growth in commercial partnership revenue due to a strategic shift from just monetising jersey real estate to player time cost, and moving from just ticket revenue to match-day income with initiatives aimed at increasing gross margin per seat”, he told ET. Vijay Mallya, erstwhile owner of USL, had bought RCB for $111.6 million in 2008 and made it a subsidiary of the company.

RCB, one of the less successful teams having failed to make it to the play-off stages of IPL seven times, posted its maiden profit in FY17 with revenues of Rs 162 crore. A year ago, RCB had contributed just 3% to USL's operating profit.

Experts said RCB’s contribution to United Spirits is significant at a time when liquor business is facing margin pressure due to high raw material costs. “Apart from high profit, RCB also helps in getting intangible benefits in terms of advertising USL brands,” said Abneesh Roy, senior vice-president at Edelweiss Securities. “However, it is still a non-core asset and the company could look at monetising to focus management bandwidth and capital in spirits business.”

From a financial standpoint, IPL franchise owners and investors are likely to focus more acutely on return on investment as the world’s premier domestic cricket tournament moves into a more mature and stable phase, experts said.

“RCB will command a premium even after not performing well largely because of Virat Kohli and also because Bangalore is a huge market for advertisers. It is their gateway to South India. Hence it is slightly insulated from their on-field performance,” said an IPL Brand Valuation Report 2018 by Duff & Phelps.
Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service