MS Dhoni's CSK is a 'champion' in unlisted market too, stock soars 15x in five years

Mahendra Singh Dhoni-led Chennai Super Kings (CSK) were crowned new champions of the Indian Premier League (IPL) cricket tournament. The Chennai-based franchise defeated Hardik Pandya-led Gujarat Titans by five wickets, bagging its fifth title, despite being in exile for two years in the 2014 and 2015 seasons.

Apart from entertaining fans with title wins, Dhoni's CSK has been minting money for investors. The stock has been trading at Rs 160-165 in the unlisted markets, where pre-IPO shares are bought and sold, even as the 16th edition of the biggest T-20 league ended on Monday after the finals were postponed for a day due to rains.

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Chennai Super Kings's shares were spun off or demerged from India Cement in November 2018 and shareholders of India Cements received shares in a 1:1 ratio. The stock was then valued at Rs 12-15, which has not surged to Rs 160-165. During the Covid period, the stock was trading around Rs 48-50 in the private market.

The multi-time champion CSK has been a champion stock in the unlisted market as the stock has delivered multibagger returns to reward investors and shareholders in the last five years. The stock price of CSK has been appreciating on the back of the rising valuation of IPL and their franchise, new team addition, and higher bid for broadcasting and streaming rights to name only a few.

Chennai Super Kings was bought by India Cements in 2008 for a consideration of Rs 371. The franchise plays its home matches at MA Chidambaram Stadium in Chennai (Tamil Nadu). The Dhoni-led team brags for being the most successful franchise with five IPL titles, 10 final appearances and 12 playoffs in 14 seasons it played.

In January 2022, CSK became India's first unicorn sports enterprise when the BCCI sold its two franchises of Lucknow to RPSG Group and Ahmedabad to Capri Global for Rs 7,090 crore and Rs 5,625 crore, respectively. According to a report from Treelife, a Mumbai-based startup advisory firm, CSK is valued at around Rs 9,442 crore.

IPL emerged as the world's second most valuable sports league as its brand value increased to $8.4 billion on the back of a new media rights auction and the addition of two new teams – Gujarat Titans and Lucknow SuperGiants. The National Football League (NFL) ranks first on this list of richest sports leagues in the world in 2023 with a $10.8 billion valuation, the report added.

There is a lack of clarity on IPO to unlock the value and provide an exit to existing shareholders, said Narottam Dharwat, Co-founder of Mumbai-based Dharawat Securities. "The sports franchise is sound financially and may post a strong performance this year but the impact of recent team purchases it's yet to be seen," he added.

However, shares of Chennai Super Kings have corrected about 35-40 per cent in the unlisted markets from the peak of Rs 250-260 to Rs 160-165 range lately. Dealers tracking the stock said the overvaluation of the unlisted market and muted financial performance in recent years have dented the euphoria for the stock.

For the year ended on March 31, 2022, the company reported a 38 per cent rise in the total revenue at Rs 349.14 crore. However, its net profit dropped 22 per cent to Rs 32.13 crore on the back of higher operational expenses.

"We see an upside potential of another 50-60 per cent from the current levels and the stock should witness its previous highs of Rs 240-250 once again and its market capitalization shall be around Rs 7,500 crore," said Sandip Ginodia, CEO of the Kolkata-based Altius Investech, a firm dealing in pre-IPO shares.

CSK is undoubtedly one of the pioneers in the T-20 cricket and should command a premium considering its previous track record. However, its recent financial performance, higher expenses and operational inefficiency are weighing on the stock price for now, Ginodia added.

Dinesh Gupta, Co-founder of Delhi-NCR-based UnlistedZone said that Chennai Super Kings has been the most profitable bet of investors in the private market and investors booked profit in the stock, leading to the correction. However, the company is fundamentally sound with strong potential for the stock.

"If you buy the valuations of Rs 9,500-10,000 crore for the company, then the stock has a value around Rs 300-325 apiece. Dhoni is also a booster for the stock and his in-ground longevity may have a near-term impact on the stock prices," he added.

Chennai Super Kings also own a franchise in the South Africa T-20 league named Joburg Super Kings, which is based out of Johannesburg, South Africa, and was formed in 2022. The team's home ground is the Wanderers Stadium, Johannesburg.  Experts believe that investors should wait to paint the entire picture with the same color.

"New impact of SA T-20 league and Joburg Super Kings' will be seen in this year's financial report. One should wait for another one or two seasons to see how things pan out in CSK's balance sheet and financial statement before making any decision as the league would need time to grow," Gupta added.

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