Raj Kundra and his wife Shilpa Shetty tell Knight Frank’s Andrew Shirley why they are passionate about investing in sport
Sporting franchises are becoming an increasingly global commodity in terms of both audiences and ownership. Exemplifying this trend are British-born entrepreneur Raj Kundra and his wife, the Indian businesswoman and Bollywood actress Shilpa Shetty. The couple own a 12% share in the Rajasthan Royals, the first winners of the Indian Premier League (IPL) Twenty20 cricket competition, which has grown into a multi-billion dollar global brand after just four years. They also invest in numerous other sectors including property and renewable energy, as well as supporting a number of charitable ventures.
Most of the world’s biggest sporting franchises and teams are owned by wealthy individuals. Why do you think they are so keen to be involved in the world of sport when there is the potential to lose a lot of money?
Raj Kundra: When people first become rich they are often still not very well known. Sport can provide them with the limelight and recognition some want. But increasingly people see it as a good investment too.
When you decided to invest in the IPL was it mainly a financial decision or an investment of passion, and was there anything about the IPL in particular that attracted you?
RK In our case it was it a bit of both. We didn’t invest in the IPL in its first season, but it quickly became clear it was going to be a huge phenomenon and the figures looked very attractive. At the end of the day it’s a valuations game. We got a lot of advice on what the team was worth and took a calculated risk. Based on current valuations it seems like we’ve made a good investment.
According to some estimates the IPL brand alone is now worth around $4bn. Do you think it can go on growing?
Shilpa Shetty Kundra: Definitely. In India cricket is not just a sport; it’s a religion. Each of the IPL teams has a huge domestic fan base, not to mention all the overseas interest. That makes it a really exciting opportunity for entrepreneurs who enjoy developing brands and creating innovative marketing strategies.
Do you think the creators of the IPL learned from the downsides of other sporting leagues when creating the format and structure of the competition?
RK Absolutely. The revenue stream from the central sale of media rights is virtually guaranteed and it was a smart move by Lalit Modi [the architect of the IPL] to introduce a salary cap. Without that you’d have the richest teams signing up all the best players like you do in the English Premier League.
India is one of the world’s fastest growing economies, but it has been relatively low key on the global sporting scene. Has the success of IPL been a boost to the country as a whole?
SSK It has made the nation more confident. It’s something we can all be proud of.
Apart from your investment in the IPL, are there any other sports you would like to get involved with?
We are actually just about to launch MMA [mixed martial arts] in India. It’s the fastest growing sport in America and each round of the Super Fight League that we’re planning will be a really exciting event, just like the IPL. There is so much more room for sport in India.
Apart from your love of sport, you are also keen philanthropists. How important do you think it is for HNWIs to contribute something back to society?
SSK It is very important. Through my foundation we are trying to help as many Indian children who are in need as possible. Raj’s company Freeplay Energy India also donates a lot of its innovative wind-up radios and torches to areas where there is no electricity. Philanthropy and investment do not need to be mutually exclusive activities.
When talking about the world’s fastest growing economies China is always mentioned first. But India is actually predicted to overtake China in terms of GDP later this century. Do you think people sometimes underestimate or overlook the potential of India?
The infrastructure and factories in China are admittedly better, but there is great brainpower in India and pretty much everybody can speak English. From an economic point of view, there is also no real formal loan structure, which helps to insulate the economy from adverse global credit conditions.
What could India do to make itself more attractive to HNW investors?
RK The property market needs to be opened up. It is hard to buy there even for British Indians. Lifting the ban on casinos would also open up a lot of opportunities.
In 2009 you said that it wasn’t the right time to invest in property. Has that changed now and are there any locations or sectors that you think are particularly good opportunities at the moment?
RK I think capital cities still have a lot of potential. I bought something in central London not long ago, which I thought was quite expensive, but it’s already gone up in value. I’m also investing in real estate in Mumbai – there are lots of opportunities in India right now.
SSK There is also a huge amount of potential in India’s tier-two cities such as Nagpur and Ludhiana. More wealth is probably being created there than in the bigger cities and people have a lot to spend. Luxury goods sales are growing very quickly and I heard that tier-two cities are now the biggest buyers of Mercedes in India.
Read my full article in The Wealth Report 2012 about why the super-rich are increasingly attracted to alternative investments including sports teams
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