Rupee bouncer stuns IPL teams, Indian players; team owners have to pay higher fee to foreign players

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August 24, 2013

NEW DELHI: The falling rupee has thrown a googly at the Indian Premier League ( IPL), with team owners having to pay a higher fee to their foreign players with whom they have dollar contracts till the end of this season while local players have been left sulking since they wouldn't reap the benefit as their fees are fixed at 46 to a dollar.

August 24, 2013

NEW DELHI: The falling rupee has thrown a googly at the Indian Premier League ( IPL), with team owners having to pay a higher fee to their foreign players with whom they have dollar contracts till the end of this season while local players have been left sulking since they wouldn't reap the benefit as their fees are fixed at 46 to a dollar.

Rupee bouncer stuns IPL teams, Indian players

Such benefits or losses from exchange rate fluctuations would, however, cease from the next season of the T20 league with the cricket board planning to pay all players only in rupee after fresh auctions.

If the Indian players had floating rate contracts like their international counterparts, they would have been paid almost 39% more on all outstanding fees until the end of this season. Ravindra Jadeja, one of the league's most expensive players, who was picked up by Chennai Super Kings for $950,000, or 4.37 crore, a year, for instance, would have got 74 lakh more in terms of the May exchange rate of 53.8 and 1.8 crore extra at 65 to a dollar.

Each franchisee has an exposure of about $4-5 million to international players and 65% of this is paid while the T20 league is on. The rest 35% is to be paid by the end of October, which will now get inflated, considering the rupee stands at over 64 against the dollar.

At the start of Season 6 earlier this year, Rajeev Shukla, the former chairman of the cricket league, had said that the players' auction next year will be held in Indian rupees. But the stakeholders had not expected dollar-sized bouncers so early.

The finance teams at various franchisees are already contemplating whether they should pay the players now when the rupee is at 64 to a dollar or wait. A Deutsche Bank report earlier this week said the rupee could drop to 70 against the dollar in a month's time, which could increase the payout for teams.

The rupee was at 53.8 to a dollar during the middle of the tournament on May 2, 2013, and has since crossed 65, an increase of 21%. The rupee closed at 64.12 on Friday.

"We will have to buy dollars at the new rates to make the remaining payments to foreign players. So, now there is an extra burden on every franchisee," says Raghu Iyer, chief executive officer of Rajasthan Royals. Indian players, he says, are not losing any money as the exchange rate was fixed at 46 a dollar when the league started.

Teams that will play the Champions League will be hit more as they will have to pay extra to their players for the league as well.

"We have discussed this matter at the IPL governing council meetings to figure out what should be done from next year onwards," says Iyer.

Co-owner of Kings XI Punjab Mohit Burman says that this year they will have to make payments as per BCCI guidelines. "But my proposal to IPL governing council and BCCI would be that players' auction should be held in rupees and not in dollars, otherwise we will continue to face volatility issues. It is an Indian league, played in India, teams are owned by Indian companies, so why should the auction be held in dollars," he says.

Amrit Mathur, advisor to the Delhi Daredevils franchisee, says this is an additional unanticipated burden. Iyer of Rajasthan Royals says his finance team will now sit to decide if they should make the payment now or wait till October hoping the rupee appreciates.


Courtesy: ET