The government has raised the FDI limit for FM radio to 26% but FM radio CEOs are skeptical about a positive impact given the state of the capital market
Pallavi Goorha Kashyup | Mumbai | October 5, 2011
|The government has relaxed the foreign direct investment (FDI) norms for the FM radio industry by raising the limit to 26 per cent from the existing 20 per cent. Though the decision has been welcomed by most players in the FM radio business, they are skeptical about how far this will provide a boost to the industry given the state of the stock markets. Profitability is still bothering most radio CEOs.|
Vineet Singh, CEO, Radio One, said, "It is a welcome change but we will be able to gauge its real value closer to bidding date of Phase 3 of FM licensing when the migration policy is clear. While radio in India has possibly one of the highest CAGR in media in the world, the global economic situation needs to be accounted for in order to ascertain certain foreign investment interest.”
Prashant Pandey, CEO & Executive Director, Radio Mirchi, said, “A higher FDI limit will help FIIs to trade more in radio stocks that are listed. Till now, the limit was 20 per cent and when FIIs approached that number, they had to take special permission from RBI to buy more. Now that limit has been raised to 26 per cent and this will help increase volumes in listed radio stocks. The radio sector in India offers tremendous growth opportunities. But, on the other hand, the sector’s profitability has been in question for much of the last five years. Even going forward, if bidding in Phase 3 becomes unreasonable, profitability could be in serious jeopardy. Also, given the condition of the money market in India right now, it is unlikely that fund raising will be very easy. Given all of this, I think FDI investments into the radio sector in India will be limited.”
Tarun Katial, CEO, Reliance Broadcast Network, said, “FDI has been an opportunity that we have been looking at. This increase in the FDI limit to 26 per cent will allow the industry to make use of foreign capital as well as strategic know-how, improving the ability of the sector greatly. It will ensure conformity of the foreign investment limit with other similar activities in the information and broadcasting sector. We will be looking at strengthening our network and would be exploring strategic partners to come in and that could largely mean there will be utilisation of that 26 per cent.
Rana Barua, COO, Red FM, said, “It is a forward thinking move indeed. But one will have to wait and watch if it will attract investment of any higher order or encourage investors/companies to look at radio as an investment space. I am sure if the limit was raised higher, we would have seen some more movement.”