Diageo Considers Selling Stake in Royal Challengers Bengaluru Amid IPL Success
Diageo Explores Stake Sale Options
Bengaluru: Diageo Plc, the renowned UK-based spirits company, is reportedly assessing the potential sale of a portion or possibly the entirety of its stake in the Royal Challengers Bengaluru (RCB), an Indian Premier League (IPL) cricket team that recently celebrated its first IPL championship.
Consultations Underway for Strategic Decisions
Sources close to the situation indicate that Diageo has begun discussions with advisors to explore various strategic avenues, including the possibility of a partial or complete divestment of RCB. The franchise's valuation is estimated to be around $2 billion, highlighting the increasing market interest and commercial viability of the IPL.
A Franchise with Legacy and Star Players
RCB is one of the founding franchises of the IPL and boasts prominent Indian cricket star Virat Kohli among its roster. Originally owned by businessman Vijay Mallya through the United Breweries Group, the team transitioned to Diageo's ownership following the acquisition of Mallya's spirits business, especially after Kingfisher Airlines, which ceased operations in 2012.
Stock Prices Rise Following Sale Speculations
In the wake of the stake sale rumors, shares of Diageo's Indian subsidiary, United Spirits Ltd., experienced a rise of up to 3.3% during trading in Mumbai, marking their highest value in five months.
Regulatory Challenges in India
This potential divestment comes at a time of increasing regulatory scrutiny in India, where the health ministry is advocating for restrictions on the indirect promotion of tobacco and alcohol in sports. This includes limiting endorsements by sports figures for unhealthy products. While direct advertising for alcohol is prohibited, companies like Diageo have utilized cricket stars to promote non-alcoholic beverages.
Impact on IPL Franchise Valuations
As the IPL continues to grow into a multibillion-dollar sports and entertainment entity, comparable to the NFL and the English Premier League, the sale of an RCB stake could establish a new standard for future franchise valuations. The league's short-format matches consistently attract large audiences both domestically and internationally.
Diageo's Global Strategy Under Review
Amid economic challenges in significant markets like the US, characterized by tariffs and a decline in demand for premium spirits, Diageo may consider the stake sale as a means to release capital. This would enable the company to concentrate on its primary business and optimize its global asset management.
Future Ownership Decisions Pending
While discussions are still in progress, insiders have noted that Diageo has not reached a conclusive decision and may ultimately choose to maintain full ownership of the RCB franchise.