The Supreme Court's proposal to suspend Chennai Super Kings and Rajasthan Royals from the Indian Premier League on Thursday left the league's sponsors, who have committed hundreds of crores of rupees, very anxious.
Cola major PepsiCo had won the title sponsorship rights for an eye-popping Rs. 396 crore for five years starting 2013—nearly double of what previous rights holder DLF had paid in 2008.
The deal, which many experts then dubbed as over-valued, comes bundled with a force majeure clause that allows termination of the contract due to unanticipated circumstances.
This season's IPL, whose first phase will be held in the United Arab Emirates (UAE), looks set to be reduced to a six-team league, threatening to erode the tournament's competitiveness and brand reach for its sponsors.
Sources pointed out that suspending two teams along with other likely changes can result in all the major sponsors, not just the title sponsor, to call for termination of contracts.
PepsiCo did not confirm or deny whether it was considering invoking the force majeure clause to look at a possible exit from its deal given the sudden turn of events that has sullied the IPL's reputation. The court will pass its interim orders today.
"The matter is sub-judice. We would not like to offer any comment," a PepsiCo India spokesperson said.
"A six-team league tournament, which appears likely, has given rise to uncertainty over how the league will pan out in the future," said an executive of a company that has a sponsorship deal with one of the teams.
Multi Screen Media (MSM), the company that owns SET Max, the official broadcasters of the event, was also keeping a close watch on the developments. "It's too early for us to say something on this. What BCCI would do, we cannot comment on that. We have to see the outcome of the Supreme Court order," said Rohit Gupta, MSM president (Network sales, licensing).
Media planners are also apprehensive over advertisers' interest in the event this season. "Advertisers could be wary of spending given the controversies surrounding the event," said a media buyer, who requested anonymity as he was contracted to book ad spots for some of the IPL sponsors.