'RCB was bigger than the brand': Why Diageo India's cricket-crazy CEO sold the IPL franchise for ₹16,660 crore

Diageo India MD, Praveen Someshwar, is a diehard cricket fan. He had played under-19 domestic cricket and he claims the reason he joined the alcobev company was the IPL team, Royal Challengers Bangalore (RCB). Soon after joining the company, Someshwar had met the entire team and was particularly impressed with coach, Andy Flower and former captain, Virat Kohli. “They are amazing guys and I realised they could teach us a lot on how we should run our business equivalents. So, I got them to speak to our leadership,” says Someshwar, in an exclusive interview with Fortune India, at his 10th floor office in UB Towers, Bengaluru.

Why would a cricket enthusiast want to exit a business that had immense fan-following and was profitable too? The return on capital was nowhere close to its core business. “I realised that the amount of time I was spending on what was not our core business was huge. Also, when I looked at the return on capital on our existing business, it was far superior to this. It's delivered between 2007 to now, but when I looked at today's valuation, I realised it won’t give us the same value. So, we did what was best for the business,” explains Someshwar.

RCB was sold at a whopping ₹16,660 crore to a consortium comprising Aditya Birla Group, Times of India Group, Bolt Ventures and Blackstone's perpetual private equity strategy, BXPE.

Wasn’t RCB a great branding platform for Diageo India, especially since alcoholic beverages are allowed only through surrogate advertising? Someshwar’s response – “Royal Challengers Bengaluru is bigger than the brand Royal Challengers (Diageo’s popular whisky brand) right now. However, nobody knew it as Royal Challengers Bengaluru. People knew it as RCB. That was the brand, which was known. It's got a life of its own, which is phenomenal. I love the concept that brand RCB is bigger than the core. Now that it's become bigger than the core, it doesn't really add back to the core.”

With Diageo India becoming richer by ₹16,600 crore, what next for the business? Someshwar says he will build interesting new categories and platforms. He admits that none of them require the type of capital the company has today, which is certainly an enviable position to be in. “We have a debt-free balance sheet. With our type of revenue and profitability, I think we can invest in as big a business as we want to. We are absolutely clean, so we will invest. We will constantly look for newer propositions.”

From zero alcohol beverages and ready-to-drink cocktails to a platform around sustainability, the opportunities are limitless, says Someshwar. “These days, the notebook I am using is Guinness and that’s just to remind me, here's a global powerhouse brand which needs to come to India. If you look at it, like spirit's premiumisation, even within beer, the premium space is growing much faster than the core space. And there's a massive opportunity.” Someshwar is definitely hinting at some good news for beer lovers!