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[HCDX] Indian Govt allows FM radio firms to create subsidiaries
NEW DELHI: The government has approved FM broadcasters setting up subsidiaries, but the foreign investment limit of 20 per cent would stay.
The Union Cabinet presided over by Prime Minister Manmohan Singh, however, has taken no decision on permitting private FM radio channels to broadcast news.
FM broadcasting companies are allowed to create subsidiaries and even go in for mergers or demerger and amalgamation of companies by way of transfer of shares. However, no shareholder, with or without foreign investment, would be allowed to change the ownership pattern of the company through transfer of shares without the written permission of the Ministry of Information and Broadcasting.
The permission will not be allowed for a period of five years from the date of operationalisation of the channel, subject to the condition that the new shareholder conforms to all the prescribed eligibility criteria.
The request for transfer of shares for the purpose of creation of a subsidiary company, amalgamation of companies of the same group, de-merger of company etc would be allowed within a period of five years on the following conditions:
The majority shareholders would continue to remain as majority shareholders and together should hold at least 51 per cent of the total shares;
The new corporate entities would also maintain their FDI component within the prescribed limit and would not violate the terms and conditions of the tender document and grant of permission agreement;
They should have minimum prescribed net worth and adhere to all the terms and conditions of the tender document and the provisions of the agreement;
The new company would be required to sign a fresh agreement with the Government on identical terms and conditions for the remaining period of license of the original company;
The transfer of shares would be permitted only once in the first five year period from the date of operationalisation.
No new tax regime will be designated to provide any incentive to encourage creation of subsidiaries, mergers, demergers and amalgamation of FM Broadcasting companies;
Tax implications would be governed by the Income Tax Act of 1961;
The action taken by the companies need to be compliant with the Companies Act, 1956. The applicant will not dilute such requirement through its Articles of Association or any Agreement.
The changes are aimed at facilitating the policy for the private FM Radio Phase II to give fillip to expansion of the sector.
Information and Broadcasting and Parliamentary Affairs minister Priyaranjan Dasmunsi said the changes were made in keeping with the difficulties being experienced by private FM broadcasters and to give them financial flexibility and promote growth of the sector.
The immediate beneficiary will be Reliance ADAG's Big FM. Though Reliance had housed its FM radio business under Adlabs, it had subsequently applied to the ministry for transferring it to Reliance Unicom Ltd (RUL).
Says Big FM VP finance Ismail Dabhoya, "The government approval will help to further raise funds independently."
TV Today Network is planning to merge Radio Today with itself. Says Radio Today CEO Anil Srivastsa, "Allowing the setting up of subsidiaries is a great step taken by the ministry as it will now help the serious players in the business to grow. Players who were losing money can now restructure their business and make further investments. As for raising the FDI limit, I am sure that in the next phase the government will tackle this issue."
My FM COO Harrish M Bhatia welcomes the government's move. "It's a step in the right direction and will help grow the industry."
Agrees B.A.G Films and Media Limited MD Anurradha Prasad: "It is a good step by the government. This move will help unlock the value and create new potential for the FM industry."
http://indiantelevision.com/headlines/y2k8/sep/sep101.php
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Jaisakthivel, Chennai, India
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