The Sanjiv Goenka-owned RPSG Group’s bid of ₹7,090 crore for the Lucknow franchise of the Indian Premier League (IPL) may have surprised and shocked many in the industry but for Goenka owning a piece of India’s richest sporting league made a compelling business case.

People close to Goenka told ET that he was clear from the beginning that he wanted the team, “at any cost” because he believed in the marquee property.

“Calculations were done and reworked for months. Multiple scenarios were discussed on price and breakeven points. As per the calculations, at this price, the franchise will break even in year 12. We had scenarios planned for 15 years too,” said one of the persons close to the development.

Sports marketing experts believe that for both Goenka and CVC Capital, which won Ahmedabad with its ₹5,625 crore bid, breakeven will depend on media rights deals.

“The two new IPL teams surely have come up with magical numbers and it’s great for cricket in India and its financial domination globally,” said Tuhin Mishra, MD, Baseline Ventures. “It will be interesting to see how things pan out for these two teams as the breakeven will surely depend on what the new media rights value go for after a year.”

The calculation is based on revenue projections from the share in the central revenue pool of the IPL as well as other revenue streams, which include sponsorships, gate revenues, F&B and licencing.

The cost, apart from the franchise fee, includes the players’ cost, management and operations cost, and marketing spends.

While Goenka will have to pay ₹709 crore per year for the next 10 years as franchise fee, the BCCI will also pay him a share from the central revenue pool.

“For the first year, it will be close to ₹200 crore, but it will increase in the next two rights cycles – year 2023-27 and year 2028-2032,” said a senior sports consultant. “Effectively, the payout in the first year will be ₹500 crore, but will decrease over the years.”

Earlier, Goenka had told ET that it was a fair value as Uttar Pradesh is a big and significant market for RPSG Group and owning a team here will help the group connect with consumers.

Talking to ET NOW, Goenka said that while he was not looking at any partnerships at this stage, the option to offload stake over a period of time is always there.

He also said he was also looking at a valuation of over ₹10,000 crore for the team in the next 5 years.

Under the franchise agreement, the Board of Control for Cricket in India (BCCI) keeps 50% of the revenues earned from the media rights and ground sponsorships, while putting 45% in the central revenue pool – to be divided equally among all the teams – and distributes the remaining 5% among the winners. Under the current rights cycle, all franchises were getting close to ₹215 crore from the central revenue pool.

The BCCI is expecting that in the next media rights cycle, 2023-2027, it will get between Rs 31,000 crore — Rs 32,000 crore, which will further go up to Rs 37,000 crore in the subsequent cycle.

“Even by the conservative projections, the central revenue pool will give all the teams Rs 288 crore from the second year and Rs 330 crore from the seventh,” the consultant said.

Further, the teams can generate close to Rs 100 crore in sponsorships, Rs 20-25 crore in gate revenues and so forth, experts said.

“For the two new teams, the total revenue in year one will be between Rs 350-400 crore, while between year two to six, it was Rs 600-650 crore per year. Year seven to 11, it will go up to Rs 800-850 crore, per year,” he added.

The teams will also incur an additional cost of around Rs 100 crore on players and support staff, Rs 50 crore on management and other operations and around Rs 5-10 crore per year on marketing.

“I won’t be worried about the breakeven,” said the consultant quoted above. “Worst case scenario, they will break even in 15 years. But this was the last time to own a team. After this, you can only buy a stake in a team, which Adani and many other interested parties will look for.”