Came across a few quotes of Chennai Super Kings (“CSK”) shares in the unlisted markets and an article today in Business Standard where IPL franchises revenues more than doubled that ignited the interest in me to dig deeper into the parent company of one franchise – RPSG Ventures that owns Lucknow Super Giants.
RPSG Ventures (‘RPSGVENT”) is part of the RP Sanjiv Goenka Group, a prominent business conglomerate in India which as a standalone and through its subsidiaries manages a diverse portfolio of businesses from Information Technology (IT) services, Business process services, Fast-moving consumer goods (FMCG) such as Ayurvedic formulations, Real estate and Sports.
Standalone Operations: Provides IT consultancy and support services in power generation and distribution sectors and possesses intellectual property rights over more than 350 applications. These IT applications focus on the entire range of activities carried out by power utilities: electricity billing, online consumer services, monitoring, MIS reporting and the management of generation and distribution assets. These IT services are provided to various group entities including CESC Limited, Haldia Energy Limited, Dhariwal Infrastructure Limited and the Group’s distribution franchisees in Rajasthan and Maharashtra. RPSEGVENT also leverages emerging opportunities in India through incubation of new businesses and investments in venture capital funds.
Subsidiaries:
IT – First Source Solutions (FSS):
A leading customized business process service provider, with a robust presence in the US, the UK, Mexico, India, Australia and the Philippines. RPSGVENT holds 53.66% stake in Firstsource Solutions, a publicly listed entity in Indian stock exchanges.
FMCG – Guiltfree Industries Limited (GIL):
GIL operates with its step-down subsidiary Apricot Foods Private Limited (“AFPL”) through their brands ‘Too Yumm’, ‘Naturali,’ and ‘Within Beauty’. GIL is a wholly owned subsidiary of RPSGVENT. GIL also has a 70% stake in Rajkot-based Apricot Foods Private Limited, which markets snacks under the brand name ‘Evita’. The company has also ventured into the QSR space and looks to foray into the quick commerce space soon.
Sports – RPSG Sports Private Limited
RPSGVENT holds 51% stake RPSG Sports Private Limited, which holds the right to own and operate Lucknow Super Giants — the Lucknow franchise of the IPL. The remaining 49% stake is held by an unlisted company of the Group.
RPSGVENT holds 51% stake RPSG Ventures Private, which holds 100% stake in RPSG Sports South Africa PTY Limited (RPSG SA). RPSG SA holds the right to own and operate Durban Super Giants — the Durban franchise of the South Africa T20 League (SA20). The remaining 49% stake is held by an unlisted company of the Group.
RPSGVENT’s other sports subsidiary – APA Services Private Limited holds 80% stake in ATK Mohun Bagan Private Limited, which operates and manages the iconic football club Mohun Bagan Super Giant. This holding is through APA’s subsidiary Kolkata Games and Sports Private Limited.
Real Estate – Quest Properties India Limited (QPIL), a wholly owned subsidiary of RPSGVENT, launched Kolkata’s first upscale shopping mall, ‘Quest’, in November 2013. In 2023-24, Quest forayed into beauty retail with launch of an exclusive ‘Beauty Zone’ with modern design and state of-the art shops covering around 9,000 square feet. Quest is also developing a residential project in Haldia spread over 3.5 acre of land.
Ayurveda – Herbolab India Private Limited, a wholly owned subsidiary of RPSGVENT has over 100 proprietary Ayurveda formulations across categories such as immunity, weight management, respiratory, women’s health and men’s health — all approved by the Ministry of AYUSH. Herbolab a state-of-the-art manufacturing facility at Silvassa (Dadra and Nagar Haveli). It also has an R&D centre in Thane, Maharashtra. Herbolab’s products are marketed under the brand ‘Dr. Vaidya’s’.
Growth & Value triggers:
FSS predominantly operates in three major business verticals: Banking and Financial services (BFS), Healthcare, and Communication Media and Technology. During Q1 2025, revenues grew by a healthy 17% on-year, primarily driven by growth in business from the US market. In 2023, FSS also acquired Ascensos Limited – a UK based provider of BPM services for the retail, consumer, and e-commerce verticals with a turnover size of ~Rs 715 crore in FY23. Last week, the company announced its commencement of operations in Australia & NZ by partnering with Victorian education institutions to set up an “innovation lab” focused on generative AI, engineering, robotics and digital experimentation. The company also announced a partnership last week with Microsoft to provide Azure suite of technologies. Revenues are expected to grow by 12-14% in fiscal 2025 through an expected pick up in deal wins and new customer additions.
The FMCG business continues to make losses although the losses are trending lower as exhibited below
The company expects breakeven to be achieved at a sale target of 1000 crores which they expect to achieve in 2 years. RPSGVENT will continue to invest in the FMCG business to expand capacity and introduce new products.
The Lucknow Super Giants (“LSG”) franchise was acquired for approx. Rs 7000 crore in 2022 . The franchise is yet to gain significant grounds in the marquee Indian Premier League (“IPL”) in comparison to the other team – Gujarat Titans (“GT”) which was the other entrant in the league around the same time of its acquisition. Of the 10 teams in the league, LSG currently ranks last in terms of brand and business value rank as per the Houhikan Lokey IPL Valuation study of 2024. The South African T20 league and the Indian Super League are nascent in their sporting journey and dwarf in comparison to the IPL whose value is estimated to be around ₹1,35,000 crore in 2024, as per Houlihan Lokey, Inc.
Anti-thesis/Risks:
With the bulk of the company’s revenues expected from FSS, the larger question of revival of the IT sector remains a key question. The slowing down of the US and UK economy and the cautious client spending despite the cuts in the central bank rates remains a significant challenge for the sector. The Chairman of the group is projecting a 2.5x increase in profit over the next 3 years through organic and inorganic growth opportunities across the globe. Deal wins, acquisition strategies and execution will remain the key to achieve the goals.
One sector that has been a drag for the group’s performance is its FMCG Business. The company has been closing about 50 of its iconic hypermarket stores – SPENCERs in several states which were loss making. While these shut downs will impact the top line, the company plans to focus only on regions such as Eastern India and Uttar Pradesh with stronger brand presence and operational performance and optimize its distribution and support structures, targeting a 20 per cent reduction in overhead costs. The revival of the loss making FMCG business will remain a key challenge for the growth prospects. The company is betting on quick commerce business through its premium gourmet shopping platform – Nature’s Basket, that sells a wide variety of international and national brands of high-end food products but this space is extremely competitive with so many players trying to take a share of the pie. Its snack brand – Too Yumm also faces intense competition from other leading players. The revival and growth of the FMCG business will remain for re rating of the overall business. Might also be worth pondering if the value of RPSGVENT would be more accretive if the FMCG business is demerged.
In IPL, Broadcasting rights remains the key sources of revenue (70%) for every franchise. The broadcasting rights grew 3x from the cycle of 2018-2022 to the current cycle where Star India procured the rights for a period of 5 years till 2027 for Rs. 235.75 billion. The title sponsorship share won by the Tata Group for 2,500 crores in 2024 is valid till 2028 and there is no significant trigger for the near term. Can such high broadcasting growth be exhibited in the next cycle remains to be seen. The franchise needs to be in top 3 positions in the coming year to command a significant brand value and valuation. There always remains the risk of more franchises entering in the marquee league which may dilute the value of existing franchises.
With a significant increase in debt over the last 2 years (probably for its sports investments), the company raised approx. 284 Crores through preferential allotment at 795 price to existing investors earlier in the year. The group’s plans and strategy on its key businesses have to play out in the coming years to justify the borrowings.
Summary:
FSS’s current market cap is approx. Rs 22,500 crores. RPSGVENT’s 53 % share would equate its holdings to approx. Rs12,000 crores. The successful teams in IPL – CSK, MI and KKR are currently estimated to command valuations of approx. Rs 8,000-9,000 crores. While the Chairman of RSPGVENT in a recent interview indicated the valuations of GT as approx. Rs 12,500 crores, those numbers may appear a bit far fetched. A conservative estimate of its LSG valuations may be estimated to be around 5,000 crores. Without reasonable data on its other businesses, a guestimate value of the overall business could best be approx. 20,000 crores. The current market cap of RPSGVENT is Rs 3,460 crores. This translates to a holding company discount of approx. 80%. Is the business really undervalued? With not much of near term growth triggers, the strategic plans of the mgt of each its businesses have to really favor narrowing of the holding period discount.
Disclosure: Not invested but tracking closely.
