AMDP Proposal Draft

 AMDP DRAFT PROPOSAL: IPL

After conducting extensive research, I have identified a possible investment and firmly recommend that we at AMDP do invest in the Indian Premier League (IPL). As a prominent entity in the global sports industry, the IPL has exceeded beyond all expectations by promoting not only a high-intensity and widely celebrated cricket tournament but also it has also emphasized suitability and community involvement, particularly for women. An investment in the IPL will not only offer us a great return on our investment, but also perfectly aligns with AMDP’s investment values.  

 

The following memo will be discussing:

·      An examination of AMDP’S ethical and sustainable guidelines

·      A detailed overview of the IPL, including its history, financial performance and claims

·      Two expert opinions on the IPL’s sustainability practices 

·      A final investment recommendation

 

AMDP Ethical and Sustainable Guidelines

 

At AMDP, we are committed to strategically investing capital into companies that we know align with our principles of environmental responsibility, social consciousness, and profitability. We use the following criteria to assess potential investment opportunities to ensure that it is the right match for AMDP, to ensure that we are also able to add value to the venture, while addressing some of society’s most pressing needs.

 

Triple Bottom Line 

The triple bottom line is a business philosophy that suggests that companies should focus on more than their financial gains, which is commonly referred to as their “bottom line”. Companies should also be considering their social and environmental impact and by performing this approach, companies can then be structured around three core components:

 

·      Planet: This is a metric that looks at how a businesses’ activities influence the environment. 

·      Profit: This is a metric that measures the financial benefits delivered to its shareholders to maximize their return on investment. 

·      People: This is a social metric that evaluates how a company’s decisions affect its stakeholders, including employees, customers and the rest of the community (Miller, 2020). 

 

 

Corporate Social Responsibility

Corporate Social Responsibility is a business concept that up until recently did not exist. Most businesses, big or small were all driven with a single goal in mind, which was to maximize profit. However, we now know that businesses have the social responsibility for not only their shareholders, but the planet and the rest of the society as well. Corporate Social Responsibility is broken down into the following four categories:

1.     Ethical Responsibility, which involved businesses operating fairly and as the name suggests ethically, often implementing practices such as setting higher wages, and ensuring that their products and services do not result from unfair labor practices such as slave or child labor. 

2.     Environmental Responsibility, which encompasses initiatives that companies adopt to minimize their ecological footprint by doing activities such as the following, increasing their reliance on sustainable resources and reducing pollution through their business practices. 

3.     Economic Responsibility which involves a business making financial decisions that is rooted in its commitment to benefit the greater society, and not just maximize the profits of the business. 

4.     Philanthropic Responsibility, which involves a business actively trying to improve society through their actions, whether this is donating a percentage of their earnings to charity or starting their own foundation (Stobierski, 2021)

Social Enterprise

A social enterprise is a type of business organization that integrates commercial strategies to maximize their improvements social, environmental well-being while aiming to be profitable. A social enterprise addresses social needs and challenges by using traditional business methods to achieve their goals (Osberg and Martin, 2015). 

Carbon Footprint 

A carbon footprint measures the total greenhouse gases emissions. Carbon footprint measures caused by an individual, organization, event or product and it can be both directly and indirectly. Carbon Footprint includes emissions from all life cycle stages of a product or service including the production, use and disposal from these emissions in terms of carbon dioxide equivalents to account for the different gasses’ and their impacts on global warming (University of Michigan, 2021). It is essential to reduce carbon footprint due to many reasons:

1.     Environmental impact: High carbon emissions contribute to severe climate issues which leads to rising temperatures, abnormal weather patterns, melting ice caps and rising sea levels. All the aforementioned can disrupt natural habits and ultimately lead to the displacement of animal communities.

2.     Wildlife conservation: If there is a high carbon footprint, this will then result in climate change which will alter the natural habits that wildlife depend on.

3.     Human Health: Increased carbon emissions can worsen air quality which can consequently lead to respiratory problems. With rising carbon footprint, this can impact food production which can then risk diseases related to poor food quality and water scarcity (University of Washington, 2023). 

Overview of the Indian Premier League (IPL)

Background 

The Indian Premier League (IPL) was established in 2008 by the Board of Control for Cricket in India (BCCI) and is a professional Twenty20 cricket league known for revolutionizing the sport. The IPL can be thought of as the cricket equivalent of the NBA in the US. Just as the NBA is a showcase for the top basketball talent coming together in one league, it is the exact same in cricket. Just like in basketball, there are multiple leagues across the world, but the NBA is the flagship league, it is the same way for the IPL. There are leagues in Australia, England, South Africa, now even the US, and even the UAE to name a few, but if you play in the IPL that is when you can say you’ve made it as a cricketer. Traditionally thought of as a boring sport, with one cricket format being played for up to 5 days, the IPL jumpstarted the revolution of quick cricket, meaning a cricket game being completed in 4 hours or less, otherwise player salaries are cut, hence an incentive to keep the game moving along. Currently in the IPL, there are 10 teams, with each team representing a different city/state in India, so you have teams such as the Delhi Capitals and the Punjab Kings. 

 

The IPL has significantly influenced global cricket with its franchise-based model and high-profile player auctions, which have turned cricket into a highly strategic and entertaining spectacle. Since cricket is a sport largely dominated in which players tend to represent their respective country for the most part, the IPL’s ability to attract international cricket stars and blend them with local talent under the franchise model has not only fueled its growth but also dramatically increased its viewership, setting new benchmarks in sports marketing and broadcast rights. 

 

Financials 

In a report by consulting firm D and P advisory, in 2022, the IPL became a decacorn with it being valued at $10.9 Billion (Farooqui, 2022). According to the same report, the IPL’s value has increased by 75% in dollar terms from $6.2 Billion in 2020. The aforementioned valuation stems from the Discounted Cash Flow (DCF) method being utilized for valuation. Moreover, the IPL’s value is primarily driven by the landmark $6.2 Billion media rights deal alongside two new teams being added into the competition for a combined for $1.6 Billion in 2022. Another factor that plays a role in the meteoric rise in the IPL’s valuation is the number of matches increasing from 74 to 94 and being played daily. Furthermore, the IPL has been termed as the second largest sporting league globally on a per match fee basis with each match being $15 million. In 2009, a year after the IPL has launched, Forbes estimated the average franchise value at $67 million. However, by 2022, the same franchises’ value had increased to $1.04 billion, mainly due to the $6 billion media contract and significant private equity investments from top firms such as CVC Capital and RedBird Capital (Ozanian, 2023).

As I mentioned earlier, although several cricket leagues have sprung since the IPL has launched, the IPL’s impact is unmatched. With Reuters reporting that in the last edition of the IPL’s final more than 120 million unique viewers tuned in to watch (Chakraborty, 2023). Cricket is also returning to the Olympics starting 2028, so IPL team values are expected to surge further. However, the biggest potential the IPL currently has in terms of its financials is according to a Bloomberg report stating that the “Saudi Arabian Crown Prince Mohammed bin Salman’s advisers have spoken to Indian government officials about moving the IPL into a holding company valued at as much as $30 billion” (Ozanian, 2023). If this were to happen, IPL teams would benefit to invest more in local talent, building bigger and better stadiums, to name just a few things. 

Company Claims 

The following company claims and initiatives align with AMDP’s mission. The IPL has partnered with the United Nations Environment Program (UNEP) to implement its “green” protocols (Lakshmi, 2024). The Secretary of the IPL Jay Shah has revealed that IPL would be launching the “Tata IPL Green Dots” initiative, named after the title sponsor Tata. Shah also mentioned that 

 

·      Tree Planting During Playoffs: For every dot ball (every ball that does not score a run) during the playoffs, 500 saplings were planted across India.

·      Coffee Plantation Rejuvenation: For every ball hitting the Tata Tiago EV (a car that was sponsoring the tournament) at stadiums, Tata Motors donated funds to rejuvenate coffee plantations in Karnataka, India. 

·      Upcycled Cheerleading Programs: Royal Challengers Bangalore's (one of the franchises) cheerleader squad used musical instruments made from recycled materials.

·      Green Game Initiative: Each team played at least two games in which all players, staff, and fans wore special green jerseys made from recycled plastic bottles.

·      Solar Energy Utilization: Installation of solar panels at stadiums like the Chinnaswamy in Bangalore and the Wankhede stadium in Mumbai to reduce electricity use and carbon dioxide emissions.

·      Eco-friendly Materials: Use of sustainable materials such as using upcycled material automobile tyres, plywood and other scrap to renovate stadium and operations to reduce the carbon footprint. 

·      Gender-neutral Training and the launch of the WPL: Introduction of female coach educators to promote inclusivity in cricket coaching globally. Moreover, the IPL has now since the past year launched the WPL (Women’s Premier League), the first of its kind league for women cricketers. It follows the same format as the IPL, with many of the same owners also buying teams in the WPL as well, further attracting an already existing audience. 

·      Reducing Carbon Footprint: Addressing the high carbon footprint from matches through various environmental sustainability initiatives such as using renewable energy sources and managing waste more effectively (Lakshmi, 2024).

 

Opinion #1

According to The Hindu, a leading publication in India, IPL's initiatives to make their stadiums more sustainable is in fact factual. According to the experts Ankit Jain and Pranav Suresh, with the IPL introducing energy-efficient lighting systems which powers stadiums that have the capacity to hold up to 100,000 fans stadiums is a step in the right direction. These systems that use LED lighting reduced electricity usage by up to 60% compared to traditional lighting solutions but also decreases the heat emitted, thus lowering air conditioning needs and further conserving energy, according to Jain and Suresh. Additionally, both experts praise the IPL's installation of solar panels on stadium roofs. This move harnesses India's abundant solar energy, reducing dependence on fossil fuels and cutting down on greenhouse gas emissions, which as discussed earlier reduced the IPL’s carbon footprint. 

 

The solar panels installed at venues like the Chinnaswamy Stadium in Bangalore and the Wankhede Stadium in Mumbai have been particularly impactful, significantly offsetting the stadium's power use and establishing a model for other sports facilities worldwide. Rainwater harvesting is another critical area highlighted by the expert. By implementing systems to collect and reuse rainwater for ground maintenance and other uses, IPL stadiums are addressing water scarcity issues, promoting water conservation, and setting a sustainability standard that goes beyond the immediate needs of cricket. The experts conclude that "The IPL's comprehensive approach to environmental stewardship through these initiatives not only reduces the league's ecological footprint but also serves as a beacon for other sports organizations globally. It is a testament to the IPL's commitment to environmental responsibility and sustainability in sports management." This endorsement from the publication the Hindu further emphasizes the effectiveness and importance of the IPL's sustainability efforts which in turn translate into a more eco-friendly cricketing industry, especially because the IPL is an example for all of the other cricketing leagues all over the world, and so the other leagues would follow suit (Jain, Suresh, 2023).

Opinion #2

A sports journalist from Forbes, Tristan Lafayette, provides a critical appraisal of the Women's Premier League (WPL), which as I previously mentioned was officially launched in 2023 and is the first of its kind cricket league for women. The article emphasizes the WPL and its transformative impact on the landscape of women's cricket. Lafayette notes, "The WPL has been a game-changer, not only elevating the profile of women's cricket in India but also globally, by providing substantial financial incentives and visibility." This is mainly due to women players now having the opportunity to earn significant sums for a 30-day long tournament which consequently helps them break the glass ceiling.  

 

Additionally, with the IPL making close to $600 million from the sale of just 5 WPL teams in the inaugural year of the tournament being launched, alongside a $100 million dollar media rights deal being generated as a result highlights the social impact of the WPL. This is especially prevalent to note because unlike the IPL, the WPL is only a 30-day tournament with 30 odd matches, and yet the teams and the media rights earnings are more than what it was for the IPL when it was first launched. However, it is key to note that the IPL’s initiative in launching the WPL has set a precedent for how sports leagues can contribute to gender equality and empower women through sport.

Final Recommendation 

After a thorough evaluation of the IPL, I strongly recommend that AMDP does invest in this venture. This investment aligns perfectly with our core values, but also promises a significant financial returns while simultaneously  advancing our commitment to social and environmental responsibility.

 

From a financial perspective, IPL has demonstrated remarkable financial stability and growth. Being valued at $10.9 billion in 2022, the league has seen a significant increase in its market value, driven by expanded media rights deals and the addition of new teams. The IPL brand has only gotten stronger year by year, and will continue to do so, given the current trajectory and rise of streaming services for the sport worldwide. Furthermore, as discussed earlier, this financial growth is bolstered by an increase in the number of matches and substantial sponsorship deals. The potential further expansion into new markets alongside the launch of the WPL presents a substantial opportunity for AMDP to capitalize on this growing market, particularly with cricket now being added to the Olympics for 2028. 

 

From and environmental and social perspective, the IPL's commitment to matching AMDP’s values is evident through its numerous initiatives such as the “Tata IPL Green Dots," solar energy utilization, and significant investments in upcycled infrastructure demonstrate the league's commitment to reducing its environmental impact. Whereas, the launch of the WPL has been a landmark move in cricket to promote gender equality in sports, and to solidify that women can bring in large amounts of crowds too, providing women athletes with significant visibility and financial opportunities. 

 

Investing in the IPL offers AMDP an opportunity to support a league that matches our core values and perhaps even forces us as a fund to look within to see what else we can do to enhance our mission. Hence, I wholeheartedly endorse this investment, particularly prior to the Saudi investment fund investing so we can ensure we get a sizable chunk of equity at a fair value.

 

Thank you,

 

Parth Suri

Research and Development Analyst Anima Mundi Development Partners  

 

 

 

 

 

 

 

 

 

 

 

 

 

Works Cited:

 

Lakshmi, R. (2024). Cricket and Climate: Exploring the Environmental Implications of the Indian Premier League. [Online]. https://earth.org/. Last Updated: 20th February, 2024. Available at: https://earth.org/cricket-and-climate-exploring-the-environmental-implications-of-the-indian-premier [Accessed 5th March 2024].

 

Amlan Chakraborty. (2023). IPL Chairman sees no threat from new T20 leagues. [Online]. https://www.reuters.com/. Last Updated: 2023. Available at: https://www.reuters.com/sports/cricket/ipl-chairman-sees-no-threat-new-t20-leagues-2023-06-01/ [Accessed 5th March 2024].

 

 

Miller, K. (2020). THE TRIPLE BOTTOM LINE: WHAT IT IS & WHY IT’S IMPORTANT. [Online]. https://online.hbs.edu/. Last Updated: 8 December 2020. Available at: https://online.hbs.edu/blog/post/what-is-the-triple-bottom-line [Accessed 5 March 2024].

 

Stobierski, T. (2021). WHAT IS CORPORATE SOCIAL RESPONSIBILITY? 4 TYPES. [Online]. https://online.hbs.edu/. Last Updated: 8th April, 2021. Available at: https://online.hbs.edu/blog/post/types-of-corporate-social-responsibility [Accessed 5th March 2024].

 

Osberg, S. and Martin, R. (2015). Two Keys to Sustainable Social Enterprise. [Online]. https://hbr.org/. Last Updated: May 2015. Available at: https://hbr.org/2015/05/two-keys-to-sustainable-social-enterprise [Accessed 5th March 2024].

 

University of Michigan. (2021). Carbon Footprint Factsheet. [Online]. https://css.umich.ed. Last Updated: 2021. Available at: https://css.umich.edu/publications/factsheets/sustainability-indicators/carbon-footprint-factsheet [Accessed 5th March 2024].

 

University of Washington. (2023). Why Do We Need to Rapidly Reduce CO2 Emissions?. [Online]. https://www.climate.gov/. Last Updated: 2023. Available at: https://www.climate.gov/teaching/resources/why-do-we-need-to-rapidly-reduce-co2-emissions-35365#:~:t [Accessed 5th March 2024].

 

Farooqui, J. (2022). IPL crosses $10 billion valuation to become a decacorn: D and P Advisory Read more at: https://economictimes.indiatime. [Online]. https://economictimes.indiatimes.com. Last Updated: 21 December 2022. Available at: https://economictimes.indiatimes.com/news/sports/ipl-crosses-10-billion-valuation-to-become-a-decaco [Accessed 5th March 2024].

 

Mike Ozanian. (2023). IPL Cricket Team Values Would Soar With A $30 Billion Saudi Investment. [Online]. https://www.forbes.com. Last Updated: November 3, 2023. Available at: https://www.forbes.com/sites/mikeozanian/2023/11/03/ipl-cricket-team-values-would-soar-with-a-30-bil [Accessed 5th March 2024].

 

Jain, A and Suresh, P. (2023). IPL, an opportunity to bat for climate action. [Online]. https://www.thehindu.com. Last Updated: 29 April 2023. Available at: https://www.thehindu.com/opinion/op-ed/ipl-an-opportunity-to-bat-for-climate-action/article66790359. [Accessed 5th March 2024].