Breakeven

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breakeven of kolkata knight riders

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Breakeven

  1. 1. BREAKEVEN ANALYSIS OF KKR<br />
  2. 2. FACTS<br />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 LalitModi, the Chairman & Commissioner IPL, BCCI Vice President<br />KOLKATA KNIGHT RIDERS<br />OWNER<br />Red Chillies Entertainment(Shahrukh Khan, Gauri Khan, JuhiChawla and Jay Mehta)<br />FRANCHISE VALUATION: $ 75.1 m<br />
  3. 3. CALCULATION OF BREAK-EVEN<br />EXPENSES:<br />The Franchise expense can be broadly divided into three.<br />Firstly the franchise fees which the franchise has to pay every year i.e 1/10th of the auction fee.<br />Second comes the expense on Team, which includes team management expenses, player salaries etc.,<br />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.<br />
  4. 4. Cont…<br />REVENUES:<br />IPL team owners have two channels of revenue, central and local.<br />Central - Includes Media, sponsorship and suppliers, which BCCI shares with the teams.<br />Local - Includes things like stadium ticket sales, local sponsorship. Concessions, merchandise et al, which franchisees will be responsible for selling<br />
  5. 5. BREAK-EVEN OF IPL1<br />
  6. 6. BREAK –EVEN POINT OF KKR:<br />NET PROFIT = TOTAL REVENUE – TOTAL EXPENSES<br /> NET PROFIT = 89 – 76 =13 CRORES<br />Here, franchisee fee = 31crores = Fixed Cost<br />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.<br />Break-even point is at 76crores<br />
  7. 7. BREAK-EVEN OF IPL2<br />
  8. 8. BREAK –EVEN POINT OF KKR:<br />NET PROFIT = TOTAL REVENUE – TOTAL EXPENSES<br />NET PROFIT = 68.8 – 68 = RS.80 LAKH<br />Here, Franchise Fee = 31crores = Fixed Cost.<br />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.<br />Therefore Break-even point is at 68crores.<br />
  9. 9. FORECASTING BREAK-EVEN OF IPL3<br />FACTORS :<br />IMG DEAL.<br />BRAND EQUITY OF KKR<br />REVENUE FROM GATE RECEIPTS<br />
  10. 10. IMG DEAL<br />IPL tournament format copyright with IMG<br />If the deal continues- Team expenses will not be affected<br />If the deal is called off- it will effect breakeven<br />
  11. 11. BRAND EQUITY OF KKR<br />The valuation is done by Brand Finance which has done other valuations for Indian companies. <br />Brand valuations of the IPL teams : <br />Kolkata Knight Riders  – $42.1 million<br />Mumbai Indians  – $41.6 million<br />Rajasthan Royals – $39.5 million<br />Chennai Super Kings – $39.4 million<br />Delhi Daredevils – $39.2 million<br />Royal Challengers Bangalore – $37.4 million<br />Kings XI Punjab – $36.3 million<br />Deccan Chargers – $34.8 million<br />
  12. 12. Cont….<br />Highest TRP for Kolkata knight riders in IPL 2.<br />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.<br />At this moment KKR is the richest team in all the eight franchisees<br />Chances of SouravGanguly returning as captain<br />EFFECTS:<br /> KKR doesn’t need to increase its promotion budget<br />
  13. 13. REVENUE FROM GATE RECEIPTS<br />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.<br />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<br />
  14. 14. BREAK-EVEN OF IPL3 (IMG deal called off)<br />
  15. 15. BREAK-EVEN OF IPL3 (IMG deal exists)<br />
  16. 16. BREAK –EVEN POINT OF KKR<br />NET PROFIT = TOTAL REVENUE – TOTAL EXPENSES<br />NET PROFIT = 84 – 81 = RS 3 crores (IMG deal called off)<br />NET PROFIT = 84 – 76 = RS 8 crores (IMG deal continues)<br />Here, Franchise Fee = 31crores = Fixed Cost.<br />Here we have increased the Team expenses by 20% <br />Because the tournament duration is expected to increase by 20%<br />
  17. 17. Thank you<br />

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