Overview of Chennai Super Kings: The Chennai Super Kings CSK is a franchise cricket team based in Chennai, Tamil Nadu which plays in the Indian Premier League (IPL) since its inception. The team is captained by Mahendra Singh Dhoni. CSK has won the IPL Tournament thrice and won the Champions League T20 Tournament twice.
The franchise has served a two-year suspension from the IPL starting July 2015 for the alleged involvement of their owners in the 2013 IPL betting case.
The brand value of the Chennai Super Kings in 2020 was estimated at Rs 611 Crores, making them the second most valuable franchise in the IPL as per the Brand Finance Report.
The overview & outlook of IPL:
- According to Duff & Phelps, global valuation and corporate finance advisors, IPL’s brand value was pegged at $6.8 billion or Rs 47,500 crore at the end of its 12th season last September. This is more than twice the $3.2 billion it was worth at the end of its seventh season in 2014.
- IPL witnessed a major milestone on September 4th, 2017, with Star TV winning the media rights for (2018-2022) five-year period, for a staggering Rs 16,347.50 crore. By virtue of these rights, the revenue share of franchises over the next 5-year period will be 50% of the above amount after deducting the production expenses incurred during the season.
- The league also signed a major title deal with VIVO for Rs, 2199 crore for the same period. ( 2018-2022)
- A combination of sponsorship and media rights ensures, your franchise will receive over Rs 1000 crore in the form of central revenue over the next five years from the BCCI-IPL.
- However, the Franchisees have to share 20% of the income with BCCI.
- The much-anticipated women’s Indian Premier League (IPL) has also been approved by the IPL’s governing council earlier this month. So Women’s IPL will most likely include the same teams as in the men’s tournament, providing a strong brand extension opportunity for the existing IPL franchisees.
|Shareholder’s Name||% of Total Shares of the Company|
|Trustees, India Cements||30.86%|
|Life Insurance Corporation||6.04%|
|Sri Saradha Logistics Private Limited||5.69%|
|Reliance Capital Trustee||2.51%|
|Radhakishan S Damani||2.39%|
|The Boston Company||1.68%|
N Srinivasan-owned India Cements, India’s leading cement maker, bought the CSK franchise rights for Rs 346 crore, to be paid in ten equal instalments over as many years until 2017-18.
It was initially run as a strategic business unit of India Cements, but was later demerged to become a wholly-owned subsidiary—Chennai Super Kings Cricket Ltd—in early 2015. In 2018, India Cements transferred its entire holding in CSK to a shareholders’ trust
Even as the pandemic led to a decline in the IPL ecosystem value, it led to an increase in IPL television viewership. As per the data, the 2020 IPL edition turned out to be a great success for broadcasters; it broke viewership and advertising revenue records.
As the economy opens up, there is an expectation that sponsorship deals may go back to their pre-Covid levels. Having been around for 13 seasons, the IPL franchise is seen to be entering a more stable phase in terms of the overall ecosystem’s value.
But according to a recently launched IPL Brand Valuation Report 2020 by Duff & Phelps, the value of the IPL media ecosystem dropped by 3.6% in 2020.
Financials of Chennai Super Kings: (Figures in Crores)
|Year||Revenue||EBITDA||PAT||EBITDA Margins||Profit Margins||EPS|
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Revenue Break up: (Figures in Crores)
|Income from Grant of Central Rights||294||240|
|Revenue from Operations||410||350|
This year the revenue has reduced from 417 Crores to 356 Crores mainly on account of reduction of income from grant of central rights from Board of Control for Cricket in India (BCCI). Accordingly, the PAT has also gone down from 110 Crores to 50 Crores.
How to value such a Franchise?
Valuations for such companies tend to be governed by private transactions instead of business nitty-gritty. Largely considered as “trophy assets” for billionaires, the valuation of such teams is additionally determined by who the potential future buyer might be , rather than being a function of the topline or bottom line. This is often further accentuated by the very fact that there can only be a limited number of teams and that they remain largely static, whilst the magnates eager to own such an asset changes.
As a consequence, a sports team’s reputation is extremely important. CSK has performed well thereon account, considering its sponsorship revenue was up 24 per cent to Rs 68 crore. “Increase in sponsorship income may be a very positive sign because it is directly linked to the brand image of the franchise,” said N Santosh, Director at Duff & Phelps.
Things forward for CSK
The much-anticipated women’s Indian Premier League (IPL) has also been approved by the IPL’s governing council earlier this month. So Women’s IPL will most likely include the same teams as in the men’s tournament, providing a strong brand extension opportunity for the existing IPL franchisees.
2 new teams will be included in the Tournament, as a result a new rule pertaining to player retention will be floated. It will be very important to see which players are retained by CSK.
Chennai Super Kings is the only squad in IPL 2021 with an average age of more than 30. So they will be looking out for young players who can come in and help the franchise not just on the field but also off the field by starring in various commercials and advertisements.
MS Dhoni (39 years old) has retired from International Cricket and will soon retire from playing the domestic tournament, so it will be very important for the franchise to search for a new leader who can carry forward the legacy’s franchise.
Timing the Market vs Time in the Market: Mr. Sharma was very much worried about the stock market would fluctuate and so will his returns. He said “I am thinking whether I entered the markets at right time. Right now, markets are volatile and can’t be timed for a better entry point”
I refuted him, “No investor can time the market for correct entry or exit point. Due to the dynamic nature of the markets, it is better to wait and hold the stock for the right time rather than timing the right entry or exit points in the stock markets.”
“Well, now I am confused, aren’t those both the same things?” Mr. Sharma said.
“Not at all, these are totally different strategies and give different results. I will help you understand these.”
Who is a perfect investor?
A perfect investor is the one who can buy a stock at its lowest price level and sell at its highest price level. This perfect investor is a myth. Time plays a very vital role in choosing an investment strategy. Fluctuating markets reflect promising returns and many of us get attracted by short-term numbers showing high gains. In the short term, markets are generally volatile, while in the long run, investments exhibit stable behaviour and deliver consistent returns.
The market moves in the most unpredictable ways in the short run, but in the long run, there is much more predictability. Before investing hard-earned funds, one needs to understand the working of markets and the risks associated with investing, which is not easily possible with short-term investments. Investment objectives might differ from person to person, but everyone intends to get good returns.
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What is Market Timing?
Market timing is an investing strategy in which the investor tries to identify the best times to enter and exit the market. This can result in higher returns than other strategies. However, there are risks involved. Changes in a market trend can appear suddenly and almost randomly, making the risk of misjudgment significant. Regular evaluations are necessary as this strategy involves active monitoring of funds invested. Timing the market requires many, many correct guesses – when to get in when to get out when to go back in again and it is a continuous process. The probability of making correct guesses most of the time is quite low.
What is Time in the Market?
This investment strategy is also called Buy and Hold investing, however, it doesn’t mean ignoring your investments. Here, the investor focuses on buying quality stocks and holding them for a longer-term. Here, the investor intends to pick a good stock at a fair value rather than an average stock with a great valuation. The longer you stay invested, the lower is the risk of losing funds. Long-term investments ensure consistency against speculative gains. Successful investors base their actions on deep research rather than random market ups and downs. However, it is advised to monitor your investments regularly.
What do we understand as the difference between time and timing? To understand this difference, one needs to look at the difference between speculation and investing. Speculation is trying to take a bet on the future direction of the market and positioning your trades accordingly. On the other hand, investing is all about focusing on the quality of the asset and holding on to it for the longer term. That is the fundamental difference between the timing of the market and time in the market. When you try timing the market you are effectively speculating on the market direction.
Why does time in the market work better than timing the market?
- In the short run, a stock market is a slotting machine but in the long run the stock market is a weighing machine. Over a longer period of time, quality stocks held on tend to outperform any kind of aggressive strategy for timing the market. Over the longer run, the vagaries of the markets tend to get smoothened.
- Transaction costs make a big difference to a timing strategy. When we talk of transaction costs, we refer to brokerage, statutory costs, taxes, exit loads in case of mutual funds etc. When you add all these up the actual economics of timing the market can change quite drastically.
- Timing the market is very vulnerable to the handful of good days and bad days in the market. Over a period of 10-15 years, there will be days when the markets will either spurt sharply or correct sharply. In the process of timing the market if you miss out on these good days or if you happen to buy on the bad days, your timing concept can grossly underperform. This is what actually happens when you try to time the market.
- When you try to time the market, you tend to get carried away by the hype in the media and the analyst community. Normally, the media and the analyst community tend to create a sense of hysteria around stocks which may not really materialize. That hysteria is essential to create interest but, in the process, you may end up hurting your portfolio.
- Time in the market gives you a sense of perspective. When you time the market, you tend to get too involved with the market vagaries at a short-term level. Instead, if you take a longer-term approach you are able to invest when valuations are attractive and vice versa. This sense of perspective works in favour of time in the market over timing.
So, clearly, Mr. Sharma should approach time rather than timing. Markets have proven time and again that passive, long-term investing without any attempt to time the market would be the superior choice.
Strategies of wealth management are some basic fundamentals that everyone should be aware of. The power of intelligent investment in the creation and multiplication of wealth is indisputable. However, many of us are not aware of some basic flaws that every investor might fall prey to. We often treat terms associated with investment strategies as financial jargons meant only for the erudite. But, working knowledge of investment is not hard to gather. Armed with this basic knowledge, we shall be equipped to make sure that we are not losing our hard-earned money.
In this article, we shall explore 8 common mistakes that investors have been making over the years and which should be avoided in order to facilitate long term wealth accumulation.
1. Ignoring Insurance
We cannot emphasize how important it is to have a well-suited insurance policy in place. Insurance policies make sure that the well-being of you and your loved ones are safe-guarded in case of any unforeseen circumstances. It provides you the knowledge that your family will be taken care of, your children will be provided for and all your financial commitments will be honoured even in your absence.
However, I have met many youngsters in their 20s who believe that they are invincible and thus above the purview of insurance policies. They forget that it is when you are young that the policies are cheapest and as you grow older, the policies keep getting more expensive. Hence, chances are that by the time you realise the indispensability of insurance policies, you will not be eligible for many of them.
Moreover, as the money in terms of periodic premiums keeps accumulating, you are privy to a bank of forced savings that have very low-risk factors associated with them. Moreover, insurance premiums are also eligible for tax benefits. Thus, when the insurance term matures, you have access to funds that will supplement your retirement plans.
2. Confusing Between Investing and Trading
Although these terms are often used interchangeably by young investors, there is a world of difference between investing and trading. If one is not completely aware of the ropes of the market, chances are they expose themselves to financial losses by trading with the wrong stocks. However, a diversified portfolio with equities that have a proven track record will help grow your savings in the long run at a moderate risk quotient.
3. Basing Investments On Ups and Downs Of Stock Market
If there is anything you should know about the stock market, then you should know that it is volatile. Stocks performing big on the first hour of the day might end up losing big as well as the day progresses. Thus, gambling your money away on the ups and downs of the Sensex arrow is never advisable. It is much more prudent to invest in healthy stocks with a proven 5-10 years track that will appreciate your wealth slowly but steadily.
4. Too Short Of Time Horizon
The golden rule of investment states that the longer your money stays invested, the greater are your returns. Such is the beauty of compounding interest. Thus, if you constantly keep taking out money from your investments, you will never be able to accumulate enough interest. It is due to this reason that most investment vehicles like fixed deposits, provident funds and ELSS mutual funds have a certain minimum lock-in period.
5. Not Starting Early Enough
The old proverb goes-“The early bird catches the worm”. Indeed, it is never too early to start investing. In fact, the earlier you start investing, the higher you end up gaining in terms of returns due to the magic of compound interest. Let us illustrate this phenomenon with an example.
Mr. A starts investing at the age of 20. He invests Rs X in a scheme that doubles his principal amount in 10 years. Thus at the age of 30, his investment grows to 2X, at the age of 40, it grows to 4X. At the age of 50, he has 8X and he has 16X when he is ready for retirement.
Now, let us consider B starts investing when he is 30. He invests Rs X in the same scheme as A. But when he turns 60, he ends up with only 8X amount. He has lost eight times his initial investment by starting 10 years later. You get the picture, right?
6. Not Having A Systematic Investment Plan
By investing small amounts regularly in a SIP, you gain the following advantages:
- Since you do not have to come up with a lump sum amount to invest, you don’t feel a financial burden or the inability to honour prior commitments
- You become a more disciplined investor
Trust us when we say that if you do not have a Systematic Investment Plan, you are losing out on your money.
7. Complicating Things
Many investors have the habit of dabbling in different equities every year. This makes it all the more difficult to stay top on your portfolio and make informed decisions. Instead, a well-chosen basket of consistent stocks in your portfolio serves the purpose of wealth multiplication quite well. And it keeps things simple.
8. Working With the Wrong Advisor
Of all the investment blunders that you might perform, this is perhaps the gravest. A wrong investment advisor will result in more than just financial losses. Thus it is very important to study the past performance of a financial advisor before choosing one. Moreover, keeping an eye on your portfolio is advised and with good reason.
Investment strategies might be a dime a dozen. The onus of choosing one that works for you lies with no one else. However, with a little amount of research and determination, carving out the path to glory is not that difficult as long as you are avoiding the pitfalls that we have outlined above. Start early, keep investing small amounts in regular intervals and watch your wealth grow. You may download the Fintoo app to start your investment now.