Your Money: Sports investing | Rules of the game

Investing in the sports sector has become one of the most attractive ways to diversify one’s portfolio

P Saravanan Portrait
It is important to know the nuances in investing in the sports sector and let us understand the market prospects in detail.

Covid-19 pandemic caused turbulence across sectors of the stock market bringing volatility in for some time. Owing to the restrictions related to large crowd gatherings, the pandemic brought significant stress to the sports sector too, but the sector showed resilience by adopting innovative methods and thereby maintaining its significance. So, it is important to know the nuances in investing in the sports sector and let us understand the market prospects in detail.

Why invest in the sports sector?
Any risk averse investor would prefer to have a diversified portfolio that could act as a shock absorber in case of any mishappening. There is no doubt that India is a country with a huge youth population whose affinity for sports is unimaginable. With the advent of digitalization, social media, and OTT platforms, the value of the sports sector has grown manifold. Further, the penetration and affordability of the internet, and the size of the sports sector also increased drastically. The young generation of the country with increasing disposable income increases the value of the sports industry by spending on sports entertainment and other sports-related activities.

Sports activities are universally popular, but the interest might differ according to the traditions and cultures. For instance, football is the most popular game in western countries, while cricket is the top sport in India. For many years, cricket has been synonymous with India, but they are now branching out into other sports that are rapidly gaining popularity. This can be seen in the emergence of the various national leagues in different sports, such as the Indian Premier League (IPL) for cricket, the Pro Kabaddi League for kabaddi, the Premier Badminton League for badminton, Hockey India League for hockey and Indian Super League (ISL) for football.

In recognition of the business potential, several listed corporations are investing in the national tournaments mentioned above. Similarly there are listed companies that produce apparel, equipment and sports entertainment. The investors could possibly consider these companies to participate in the sports industry.
Government support to the sports sector

The Government of India is keen on investing in sports so as to create a nation with healthy citizens/workforce. In this line, the government has announced many flagship schemes related to promotion of sports /sports industry and the most significant programme is the ‘Khelo India’ programme which is aimed at reviving the sports culture from the grass-root level by having a strong sports framework.

Also, with the increasing popularity of multi-sporting events such as IPL, ISL and other such tournaments, the government is keen on promoting sports entrepreneurship. In addition this the government also has allowed 100% FDI in the sports manufacturing sector which will bring in new technology, employment generation and other such advantages and increase the business prospects of the sector. Thus, investors might consider investing in the same to have a diversified portfolio.

Is the current market conducive to invest?
It is the right time for the investors to look into the market conditions before investing. The sports industry has remained resilient because of its loyal customer base over time. This loyalty can mainly be attributed to the emotional connection people have with the sports brand/company/team. Another important market value determinant for this sector is the growing awareness among the population to adopt a healthy lifestyle and healthcare, which has increased the business prospects. To conclude, like any industry, the sports industry is also not immune to any shocks in the market and one should look into the issues that may be a possible problem to the industry. With the large audiences that sports events attract, investing in sport has become one of the most popular ways to add to your investment portfolio.

P Saravanan is a professor of finance & accounting at IIM Tiruchirappalli. With inputs form A Paul Williams,research staff at IIM Tiruchirappalli

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