Venky's Sporting Ego

If you have the money and want to be famous, you can do two things. One, feature on the Forbes Rich List or go out and buy an English Premier League (EPL) football club. Roman Abramovich did it when he bought Chelsea and Malcom Glazer when he signed the cheque for Manchester United.

Add one more name to the list from November 2010: India’s Anuradha Desai, chairperson, Venkateshwara Hatcheries (Venky’s). Along with her brothers Balaji Rao and Venkatesh Rao, Desai will pay 46 million pounds (Rs. 325 crore) in an equity-based deal for Blackburn Rovers, a club based in Blackburn, Lancashire. This is a very unusual step for a company whose primary business is poultry.

“There are two reasons why you buy a sports team,” says Rajesh Jain, media and entertainment head, KPMG India. “One is for the pride of owning a team and the other is for strategic branding equity advantage.”

Desai has gone on record stating that Venky’s has bought the Rovers to promote its corporate image and brands globally. The company has a poultry feed manufacturing unit in Vietnam, a vaccine unit in Switzerland and will set up a broiler breeding unit in Bangladesh. It’s looking to expand it’s footprint in Europe. Desai calls it a ‘protein company’. It looks like the Rs. 3,800-crore Venky’s is planning to use the Rovers as a giant advertisement. Vijay Mallya has done that with his Formula One team Force India and his Indian Premier League buy Bangalore Royal Challengers. Anyone who watched either sport can’t miss the barrage of logos from Mallya’s companies.

It may not be such a bad idea. Blackburn Rovers is one of the oldest clubs in England (established 1875). It is also one of the most well-run clubs with a reasonable amount of debt on its books (Rs. 112 crore) that will be wiped clean with Venky’s equity. It has a competent manager in Sam Allardyce and finished in the top half of the League table in the 2009-2010 season. Once the deal goes through, the real challenge for Venky’s will be to balance the ambitions of the club with its finances. Venky’s can look at Manchester United as an example of how not to run a club. The Glazer family paid too much and the club is caught in a debt trap. If the Glazers can’t pay off their debt by 2017, control of Manchester United will pass over to a bunch of hedge funds. These are the perils of buying a football club on a credit card.

Venky’s has done a lot of things right. It has not paid an exorbitant amount for the club. The new owners have said that Sam Allardyce’s job is safe, for now, and that has earned them brownie points from the fans. Venky’s has a history of creating value for its shareholders. Its share is trading in the BSE at over Rs. 800, up from Rs. 31 in 2002. So you know that they are not fly-by-night operators. They have cleared all the tests posed by the EPL and their due diligence has gone off without a hitch. But the funds for this deal haven’t come out of Venky’s own pockets. The deal is funded by ICICI Bank. Right now, though, it doesn’t look like Venky’s will get caught in a debt trap like the Glazers.

The next challenge will concern club ambitions. When news of the deal broke, Desai said that Venky’s would be happy with a ranking between 10 and 12 in the League. Fans in Blackburn were puzzled. Forbes India spoke to Andy Cryer, Blackburn Rovers reporter for Lancashire Telegraph, a Lancashire-based newspaper, after Venky’s said that they would release Rs. 35 crore for players when the transfer window opens in January. “There is a little bit of negativity among fans here,” said Cryer. “They are happy that the takeover is taking place but they need clarity on a lot of things.” Like why would a club remain content being number 10? Every step up on the League table means the club gets an extra Rs. 5 crore from the EPL.

Illustration: Abhijeet Kini

Later, in an interview to UK-based Telegraph, Desai did a turnaround and said that the club would be aiming for a top four finish. The club will need to attract quality players to fulfil that dream. Wayne Rooney earns Rs. 1.3 crore a week after his new deal with Manchester United. Venky’s will have to really loosen up its purse strings. Venky’s and Blackburn Rovers did not speak to Forbes India for the story. But it has a couple of aces up its sleeve. The deal was possible to a large extent because of the facilitation of Kentaro, a global sports agency that specialises in acquisition and distribution of TV rights. With Venky’s making it very clear that it intends to make Blackburn Rovers a global brand, Kentaro could be the perfect vehicle for them.

The owners are also open to selling the rights to the name of Ewood Stadium, the home ground for the Rovers. An Indian owner in the EPL may result in increased sponsorship from other Indian companies.

The biggest ace though is India. Over 20 million Indians watch EPL matches every week on TV. Manchester United has opened up cafes here. Arsenal and Liverpool are in talks to set up training centres in the country. Desai has said that the Rovers will play in India. While she may not achieve her ambition of a ‘nation of Rovers fans’, if Venky’s marketing machine gets it right, millions of Rovers jerseys could be seen on the backs of people in India.