Sports need industry status in India to achieve full potential



Sports need to be awarded industry status by the government to allow related businesses in the country to grow, according to experts. “For sports to sustain in India as a business, it is imperative that the nature of its ecosystem moves from a non-profit to a for-profit one,” according to a recent report published by KPMG and the Federation of Indian Chambers of Commerce and Industry (Ficci).

It said this would increase investor confidence and availability of capital for the sector, as well as generate more revenue streams to help leagues to become commercially successful.

Having industry status will allow companies operating in the sector to easily secure bank loans and this will lead to greater involvement from the private sector, as well as tax concessions, all under a proper regulatory framework.

Bollywood, for example, was granted industry status by the government only in 2001.

New sports leagues are being launched as the country starts to branch out beyond cricket. The Indian Super League (ISL) for football and the Pro Kabaddi League were launched last year. Such leagues could generate greater sports revenues for the country’s economy.

But the report stated that the “lack of an organised sports sector has inhibited for-profit ventures in sport”. These include franchisee training academies, merchandising, sports infrastructure, and sports careers.

Industry status could, for example, incentivise professionals to associate themselves with sports, because the greater availability of capital is likely to lead to higher renumeration, while policies on labour rights will help attract people into the sector too, the report said. At present, few graduates pursue a career in sports and sports-related businesses because of the lack of opportunities in the unorganised sector.

“Granting industry status could lend acknowledgement to the sector’s potential and also clearly define the components comprising the sports industry,” according to the report. “This, coupled with policy initiatives and regulations, could drive greater professionalism and hence increase investor confidence.”

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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