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Sun nears Deccan Chargers buy

The Chennai-based Sun Group, promoter of Sun TV and SpiceJet, has entered the race for Deccan Chargers, the IPL team owned by the financially-troubled Deccan Chronicle Group.

The Chennai-based Sun Group, promoter of Sun TV and SpiceJet, has entered the race for Deccan Chargers, the IPL team owned by the financially-troubled Deccan Chronicle Group. Both Deccan and Sun remain tight-lipped about a possible deal, but sources said Sun was in the ?final stages? of discussions to buy the entire Deccan Chronicle stake in Deccan Chargers Sporting Ventures, the entity that runs the IPL franchise.

The Board of Control for Cricket in India (BCCI) recently asked the Deccan Chronicle Group to resolve its financial problems with regard to Deccan Chargers by September 14, failing which it could be eliminated from the Indian Premier League. This is because the Deccan Group had mortgaged Deccan Chargers to banks without BCCI approval. The IPL contract bars promoters of franchisee teams from mortgaging their team for borrowing money for other businesses. However, some bankers said current rules do not prevent them from having a right on revenues earned by Deccan Chargers through sponsorship and ticket sales.

The sale of the Deccan Chargers franchise was finalised by the promoter company some days ago after getting the nod from the BCCI.

The Deccan Chronicle Group purchased the team in January 2008 for $107 million (around R588 crore) jointly with GroupM, the media arm of the world?s largest advertising firm WPP, which owns a 20% stake. While the Deccan Chronicle Group wants at least R1,500 crore for its IPL franchise, sources said negotiations are on at 25-30% below the asking price. The Deccan Chronicle Group will use the proceeds of this sale to repay lenders as the company is in financial trouble.

?I wouldn?t be surprised if the deal is finalised in the $190-200 million range. Deccan Chronicle has infused a lot of money in making a brand out of Deccan Chargers,? said a top executive with a sports marketing firm. Out of the five editions of IPL played so far, Deccan Chargers won in the second edition played in South Africa.

Experts said if the deal goes through, it will give the Sun Group great branding and marketing mileage as it is already a large business conglomerate with 32 TV channels, a direct-to-home television platform, 45 FM radio stations, two dailies, five magazines and an airline. Both parties concerned did not comment on the development. Mails sent to Sun Group executives remained unanswered at the time of going to the press. When contacted, VC Unnikrishnan, chief financial officer of Sun TV Network, said: ?There is no truth in the matter.?

?Anyone who gets Deccan Chargers will get it at a much lower rate than if BCCI terminates its contract and calls for an auction,? said the marketing head of a rival IPL franchisee team, requesting anonymity.

?This is the key point which is attracting certain companies to buy out Deccan Chargers,? the marketing head of a rival IPL franchisee team said.

In January 2011, Deccan Chronicle merged its wholly-owned subsidiary Deccan Chargers Sporting Ventures, which owned the stake in the cricket team, with itself. The company has been forced to sell its IPL franchise after it landed in a debt trap and defaulted on payments to lenders like the Life Insurance Corporation of India, IFCI, United India Insurance and Royal Sundaram, among others. Reports suggest Deccan Chronicle may have borrowed around Rs 3,200 crore from 28 lenders. However, only two private sector banks and one financial services firm have the right on Deccan Chargers? revenues as collateral against their loans, suggest reports.

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First published on: 03-09-2012 at 22:16 IST
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