FDI cap for pvt FM radio may be raised to 26%

Retaining the current 20% FDI cap in radio companies, govt may allow an additional 6% for FIIs and others

In a cautious initiative to attract foreign investors in private FM radio space, the overall foreign investment cap may be increased from the current limit of 20 per cent to 26 per cent. However, the government may attach a rider while allowing this.

According to sources, the government may retain the current 20 per cent foreign direct investment cap in the radio companies while allowing the additional 6 per cent for foreign institutional investors and others.

The private radio companies have been demanding an overall increase in FDI cap to 26 per cent or 49 per cent from the current 20 per cent limit.

But radio is considered a sensitive sector by the Ministry of Information and Broadcasting (I&B) as it influences the masses. Therefore, neither the FDI limit has been raised so far nor news and current affairs have been allowed on private FM radio channels.

But a review of the FDI cap may open doors for more changes in private FM radio companies, sector analysts feel. "It is a step-wise process. First, the overall cap will go up to 26 per cent followed by the nod to news and current affairs. Once the government is satisfied with the overall growth of the sector, it may actually allow 49 per cent FDI limit too," an analyst said.

According to the present status, 30-odd radio companies have the licence to open 266 private FM radio stations across 91 cities within the next 12 months. According to industry estimates, over Rs 3,500 crore of investments have been made by these companies and more funds are required for expanding the sector.

An overall increase to 26 per cent in the foreign investment limit is likely to help most of these 30-odd FM radio companies raise foreign investments.

As part of its move to review the foreign investment cap in the broadcasting sector, the government is set to announce an increase in the FDI limits for the direct-to-home (DTH), cable and IPTV sectors shortly.

While the cable sector may be allowed to raise its FDI limits to 74 per cent from the current limit of 49 per cent, the DTH companies may be allowed to raise their 20 per cent FDI cap (of the total 49 per cent foreign investments cap) to 26 per cent while continuing with an overall 49 per cent cap, sources said.

Since IPTV is a new sector with no defined foreign investments cap, the government is likely to allow foreign investments of 74 per cent.

These moves, according to the industry observers, will help DTH, cable distribution companies and IPTV companies raise more money.