What if one of the most popular IPL teams were to list on the stock market? Investors could double their money in six months. A struggling non-banking lender could get some funds. And a bunch of former players could turn richer.
That’s if going by trading in Chennai Super Kings Cricket Pvt. Ltd. The eponymous holding company of the IPL team with more than one lakh shareholders, including D-Mart promoter and billionaire Radhakishan Damani.
In January this year, CSK investors received their promised shares in a private market transaction. The company’s share price has doubled since then—from Rs 16 to Rs 32-35 apiece—in the over-the-counter market, according to two people involved in the transactions. They spoke on the condition of anonymity as they are not allowed to talk to the media.
At this share price, assuming all rights to convert debt to equity are exercised, CSK is worth Rs 1,200-1,320 crore ($171 million), according to BloombergQuint calculations. That’s nearly twice the $98-million valuation assigned by US-based consultancy Duff & Phelps last year. Not surprising as CSK is the second-most followed franchise, after Mumbai Indians, in the $6.3-billion Indian Premier League—the world’s biggest T20 cricket tournament. Led by former India captain Mahendra Singh Dhoni, it has made the finals in eight of the 11 IPL editions.
New Owners
CSK’s largest shareholder is a trust of former cricketers, which received the stake from N Srinivasan, head of India Cements Ltd. and former chairman of the Board of Control for Cricket in India. IL&FS Financial Services Ltd., the non-bank lending unit of the crisis-hit infrastructure group, has the option to convert its debentures into equity for an 18.8 percent stake.
The team was a division of India Cements till 2014. In September that year, its board approved the proposal to spin off the franchise into a wholly owned subsidiary, Chennai Super Kings Cricket, by transferring its net assets at cost—Rs 7.83 crore.
The objective, according to a September 2015 exchange filing, was to let shareholders of India Cements own and manage the affairs of CSK. At the time, the cement maker had more than 1.01 lakh shareholders—including mutual funds holding 7.5 percent, foreign investors with 27.6 percent and individual investors like Damani owning 1.99 percent.
CSK declined to comment on an emailed query seeking its latest shareholding pattern.
Since it was distributing assets—in this case, unlisted shares—to non-promoters, India Cements didn’t follow the route of scheme of arrangement usually taken for such cashless transactions.
India Cements sold 50,000 shares in CSK at Rs 10 each to ‘India Cements Shareholders Trust’, which was established to distribute shares to all non-promoter shareholders. The promoter stake was transferred to India Cement Ex-Cricketers Trust.
The transaction was recorded on Jan. 1, 2015, and investors were to get one share of CSK for every share held in India Cements. But it took nearly four years to actually transfer the respective stake to minority shareholders.
The Ex-Cricketers Trust, according to another exchange filing by India Cements, received the shares in January this year.
Scandal, Ban And Return
Though planned earlier, the change in ownership structure came when India Cements and CSK were facing a Supreme Court-supervised probe after a betting scandal rocked IPL. The panel suspended CSK for two years—2016 and 2017—after finding Meiyappan, the team principal and Srinivasan’s son-in-law, guilty.
CSK returned to the IPL in 2018. Derided as a “Dad’s Army” because of several players aged 31 or more, it lifted the trophy last year. That, Duff & Phelps said, added to the MS Dhoni-led team’s “aura of invincibility”.
How IL&FS Got In
As it prepared to return after the IPL ban, CSK raised Rs 65 crore through 8 percent optionally convertible debentures from IL&FS Financial Services for working capital and general corporate needs. The terms gave the non-bank lender the option to convert the debentures into equity shares after two years at Rs 9.12 apiece, including a premium of Rs 9.02. If it does that, IL&FS Financial Services will own 18.78 percent stake in CSK on a fully diluted basis.
The IL&FS unit has yet to respond to an emailed query on whether it plans to exercise the option when the two years end in January 2020.
Listing Possibility?
CSK is a public company, meeting the regulatory requirements for an entity with more than 400 shareholders. But it’s unlisted. And there’s no clarity if the IPL franchise plans to trade on the bourses.
The company refused to comment on emailed queries seeking its latest financials and clarity on listing plans. Barring occasional briefings at shareholder meetings of India Cements, investors haven’t received any communication.
The only response India Cements provided to the BSE on CSK’s listing and exit options was in its September 2015 filing.
“We are not aware of any plans, as of now, to list the team after distribution of shares. As an unlisted public company, the shares are ‘freely transferable’ and investors ‘will be in the same position as the shareholders of any unlisted company’,” it said, adding that the “route of private sale is always available to them as an exit option”.
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