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Wednesday, May 09, 2012

Venkys, Blackburn and the Premier League - Part of the plan?

  • Venkys has been somewhat of a sudden star in the Indian business horizon. A few years ago, no-one had heard of them. Then they sponsored Trinidad and Tobago in the Champions League ( the cricket version that complements the IPL ). There was some favourable media press about how they were touched by this brave team, which did not have a sponsor. The T&T team played the whole tournament with Venkys written on their chest, and all of India scratched their heads, wondering who Venkys was, coz none of their products or their logo was familiar to the average Indian.
    They are listed on the stock exchange and their total market cap looks like 70 M USD. Looking at that I wonder how they passed the fit and proper person test. The total market cap of the group is say 50M pounds, and they sell Phil Jones and Samba for more than half that amount. It sounds lopsided.
    Ask any Indian, and they would tell you that the Reddy's are not stupid. They might be the cleverest of all businessmen you would have known. They did not go into this with their eyes closed. They bought something that was not in their league, by being at the right place at the right time, and making the right noises.
    The first job was to get rid of costs. So expensive players, managers, staff etc will be let go. Relegation or promotion doesnt affect them. I am sure the underlying asset, property, stadium, brand value etc will be comfortably more than their investment, so there is no way they can make a loss.
    Relegation helps by making things even easier. All players that can get a buyer will be sold, with noises about building a team for the future. If money is invested, it will be in tangible assets, improvements to stadium, purchase of training ground etc. They invested 23M in the takeover and say another 20M in clearing debts. They have already sold players for about that amount, so that means whatever remains cost them nothing.
    Now that it costs nothing, and there's still Yakubu, Pederson etc to be sold, they seem to be sitting pretty. If the club also owns property and physical assets, that is almost like a 100% profit in 2 years.

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