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Only large radio networks to benefit from extension of FDI limit, say experts

Only large radio networks to benefit from extension of FDI limit, say experts

Author | Abhinn Shreshtha | Monday, Nov 16,2015 12:39 AM

Only large radio networks to benefit from extension of FDI limit, say experts

In a surprising move, the central government announced that FDI limit would be increased for private FM sector, among other sectors; a decision that has been welcomed by the radio sector which has been asking for an increase in foreign investment limit for years. However, many experts believe it will only be beneficial for large radio networks.

According to the new government policy, the FDI limit for private FM will be increased from 26 per cent to 49 per cent. Even though there have been calls for the limit to be increased beyond 50 per cent; FM operators will take this as a positive step.

“The proposal to increase the FDI cap for the broadcast sector is a big step in the right direction. It will infuse additional funds in the sector, and aid in the industry’s growth. India’s radio sector has huge potential, and such steps are sure to increase the interest from current and prospective investors alike. The government should also consider relaxing rules for non-news FM channels and allow FDI through the automatic route, or consider increasing the cap beyond 50% - similar to what has been proposed for non-news TV channels – to fully release the FM industry’s potential,” said Ashish Pherwani, Partner, Advisory Services, Media and Entertainment, Ernst&Young.

 “This move will definitely see a positive reflection on the industry. Not just in the form of infusion of fresh funds, this will also help in building strategic tie ups with foreign players who have been in the medium for long. With the expansion in Phase III, an influx of fresh content and newer formats will surely add in a lot of excitement. A 49 per cent limit will certainly be lucrative for a strategic investor who is willing to partner the growth that the sector is currently witnessing,” said Apurva Purohit, CEO of MBPL (Radio City).

Though agreeing that it was a positive step, Harish Bhatia, CEO of MY FM opined that there were other issues that the government should also look into. One of these, according to him, is allowing 100 per cent investment in non news stations. “They (the government) also need to align with industry in many other matters which are hampering growth and hence job creation. Something that they could do is setting up of copyright board to ensure one rate of music royalty. Rationalization of DAVP rates pending since last 8 years, policy on internet radio, etc. are also some other things that need to be looked at,” said he argued.

Also, to imagine that the increase in FDI will have a direct, positive impact on smaller radio stations is being too optimistic according to heads of regional radio stations we spoke with. The head one of the most popular regional FM stations in the East said that the increase in FDI would only help the larger radio stations. Though agreeing that it was a positive step for the ecosystem in general, the person said that strategic investors are only going to be interested in the larger radio stations given their extensive infrastructure.

Taking the long term view, Jimmy Tangree, Head of Friends 91.9 FM also agreed that initially it would be the bigger networks who would benefit from investor interest. “Across the world, investors always look at larger networks,” he said, though adding that investment in technology and programming is always welcome and would help the industry.

“We will gain in terms of understanding about programming and marketing. Global know how will help us,” opined Harshad Jain, CEO of Fever FM.

But has there been any indication of interest from foreign investors?

According to heads we spoke to, investors have been showing interest for quite some time and with the recent Phase III auctions, the time is ripe for them to dabble in the private FM sector in India.  Without taking any names, the head of one radio station told us that some of the biggest media entities in the US are waiting to enter the private FM space in India.

One thing that stands put in the decision though is that , unlike the defense sector, investments in radio will have to be channeled through the government. When asked whether this creates an unnecessary roadblock, Nisha Narayanan, COO of RED FM said, “We do not think that the FIPB should be a roadblock . We understand the concerns of the Government of have some sort of. Screening of the companies that are coming into this sector and we are quite ok with the FIPB route . After all the Indian companies themselves go through a security clearance.”

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