AMC will generate revenue through cricket properties

11 June 2017 07:44 am - 0     - {{hitsCtrl.values.hits}}

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by Champika Fernando

A new company being set up to manage Sri Lanka Cricket (SLC) properties will be empowered to generate revenue from existing stadiums by, among other things, building and marketing specialty cricket hotels and other fee-earning facilities.

The proposal has not gone down well with sections of the cricketing fraternity who suspect the SLC is conspiring to swallow up the hard-earned monies of players. But those promoting moves to set up this asset management firm say it affords financial freedom to the country’s richest sporting body to bring in returns from existing infrastructure.

“The whole idea is to see how best we can leverage the assets,” said Reyaz Mihular, Managing Partner of KPMG, the firm that was commissioned by SLC to draft a plan.

On the advice of the Attorney General’s Department, the proposal was passed at the SLC annual general meeting a fortnight ago. It will see SLC transferring all its immovable properties to the new company for “better leverage”.

KPMG closely analysed bodies like the International Cricket Council (ICC) and Cricket Australia. It found something in common: They had separated their functions into two. One was cricket management; the other was leveraging potential behind the assets.

“For example, take Cricket Australia,” remarked Mihular. “At MCG, there’s a cricket café and a cricket museum. People even go to MCG when there are no matches, paying an entrance fee to see the museum and to enjoy a meal. This is exactly what we are proposing to do here.”

Why cannot the existing SLC committee manage its own assets? The answer, Mihular says, is simple. The biggest weakness in the system is the absence of legality.

“No businessman or company will enter into a contract with a committee that is elected every year because of the uncertainty and absence of legal production,” he explained. “For instance, if a new committee did not like a particular idea and wanted to take the project over, all that investment is gone. So they (a businessman or company) prefer always to negotiate with a company, a legal entity which they can sue.”

Once set up, the proposed asset management company will become a legal entity able to enter into various contracts with third parties aimed at optimising use of existing stadiums while protecting the interests of SLC.

“At Dambulla, for instance, there are 65 perches of land just sitting there,” Mihular said. “You ask someone to build a cricket hotel, like the Formula I hotels you find next to racing tracks in Europe. These are very basic hotels but people like to go and stay in them. We can build one like that on the Dambulla property. It need not be like the Kandalama Hotel. But, believe me, people would love to come and stay. During matches, it could be used as player accommodation.”

The grounds usually host a maximum of three matches per year and lie idle the rest of the time. Swimming pools, velodromes and other facilities could be introduced to turn them into leisure centres. Such projects can only be executed through a legal entity.

SLC is one of the country’s biggest brands with a value exceeding billions of rupees. This is an estimate, as SLC has not done a brand valuation so far. SLC earns its income largely through ICC distribution (a large sum that comes once every four years), selling television rights and team sponsorships. But they incur huge costs maintaining the national team, coaching staff, employees and stadiums.

“We depend a lot on the share of profits ICC gives,” Mihular said. “In between, if you get an India tour, you make money. Most other tours are dead losses. Still, you have to host them. If it is an away-tour, you make no money at all.”

This means that SLC suddenly sees money coming in. Then, for the next four years, it makes huge losses, followed by profits again during a World Cup year. “If you have an asset management company that can generate some income, that can supplement the revenue from ICC,” Mihular asserted.

SLC spent a staggering sum–exceeding several billions of rupees–on putting up stadiums to co-host the 2011 World Cup, Since then, it has found it difficult to meet maintenance costs. “Apart from money spent on cricket development, you spend on assets with no income from those assets,” he said. “This is like Mattala Airport. We have an airport but no income and spend money to maintain it. A company could put it to use.”

A major concern in the proposed move is a possible lack of transparency and accountability. Mihular says there is no room for foul play as the company will be bound by the Sports Law. The Auditor General will audit its accounts.

“We will insert in the Articles of Associations that the audit will be done by the Auditor General,” he reiterated. “We also will get the Minister of Sports, who now has oversight, to have his representatives on the board to ensure proper procedures are followed.” The income that is earned by the company will be paid out to SLC.

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