Wednesday, December 08, 2010

IPL Player Retention and Auction Dynamics

The list of players retained by IPL franchises is out and it’s no surprise to see Mumbai and Chennai retain their full quota of four players. Rajasthan have retained two while Delhi and Bangalore have retained just one player each. Some of the choices like Tendulkar, Pollard, Dhoni, Raina and Sehwag are obvious ones. There are a couple of picks that surprised me, namely Shane Warne and Virat Kohli. Not because I don’t think they are good enough to be retained but because I don’t think Bangalore and Rajasthan would have had to bid $1.8 million and $1.3 million respectively should these two players have gone into the auction. I assumed the $1.3 million figure for Warne as Rajasthan also retained Shane Watson. Come to think of it it’s also a stretch to believe Watson would have drawn a bid for $1.3 million let alone $1.8 million.


So how does one explain this? Well, one thing that needs to be noted is the franchises may not be paying the retained players the same amount as that they lose from their auction money. For example, it could very well be that Mumbai Indians are paying Tendulkar, say $2 million, but they’ll lose on $1.8 million from their payroll. Conversely, they could be paying him $1.5 million and still lose $1.8 million before going into the auction. In essence, the amount a franchise pays to a player it retains has been negotiated internally.


It’s easy to understand teams retaining players on a salary higher than what they lose before going into the auction, especially if the owners are as rich as Mukesh Ambani or N Srinivasan. But there is an interesting scenario wherein a team might choose to lose a higher amount from its payroll despite paying him less. In their brief history Rajasthan have been the smallest spenders in the IPL. It hasn’t affected their performances a lot. Afterall, they won the inaugural IPL and were just one win away from a semi-final spot in the last two seasons. It could very well be that Rajasthan got Warne and Watson to settle for a lot less than $3.1 million put together, thereby avoiding a scenario wherein the franchise could get into in a bidding war and either lose them or have to pay an amount greater than what they signed these two for. This may also explain them not retaining Yusuf Pathan who might have declined the salary Rajasthan were offering him. Afterall, he could well go for more than $900,000 or whatever amount Rajasthan were willing to offer. Sure they now have just $5.9 million for the auction, but if Mumbai and Chennai are confident of building a squad with just $4.5 million each then Rajasthan wouldn’t have a problem building theirs with $1.4 million more to play around with.


How does all this affect the auction? For starters, half the teams are going into it with a smaller purse than the other half.


Team

Auction Money (USD)

Players Remaining

Average Price (USD)

Deccan

9 million

25

360,000

Kochi

9 million

25

360,000

Kolkata

9 million

25

360,000

Pune

9 million

25

360,000

Punjab

9 million

25

360,000

Bangalore

7.2 million

24

300,000

Delhi

7.2 million

24

300,000

Rajasthan

5.9 million

23

256,521

Chennai

4.5 million

21

214,285

Mumbai

4.5 million

21

214,285


Some of the spots will be taken up by domestic players who won’t go into the auction. These players include Ambati Rayudu, Siddharth Trivedi, T Suman, Mithun Manhas, Iqbal Abdulla. However, anyone who has played for India will go into the auction. This means players like Cheteshwar Pujara, Umesh Yadav, Abhishek Nayar, Saurabh Tiwary, Ashok Dinda, Venugopal Rao will be able to test the market.


Now we have a situation in which some teams have more leverage going into the auction. But there is another variable in this whole process as teams don’t know the order in which players would be bid on. Hence, there could be a scenario in which a team is forced to bid an excessive amount for a player just because he happened to be among the first few names out of the hat. As a result, they may not have enough money to bid on a lot of other quality players later on in the auction. Mumbai and Chennai are in the weakest position as far as the auction is concerned, but they’ve covered up well through the players they’ve retained. They just need to guard against getting into a bidding war early on in the auction as it would be difficult to have a proper squad if they have to spend $1 million or more on getting a good keeper-batsman (Mumbai) or a wicket-taking fast bowler (Chennai). The other teams could identify the missing pieces in Mumbai or Chennai and try upping the price of players who these two teams might need desperately.


I don’t know if all this sounds interesting to most people. It does to me because I think this is where the businesspeople in the franchises need to think hard about getting the slightest edge over the others. Players will be locked in for three years and if the suits screw up at the auction there will be a lot of trouble on and off the field. One just needs to look at the Kolkata Knight Riders and the Bangalore Royal Challengers from the first season to realize the importance of player acquisition.