The Mayaram panel has reviewed the policy with a view to boosting FDI flows to revive economic growth
New Delhi: Media companies with print, television and radio businesses, currently facing challenges posed by a slowing economy, had a mixed response to the news of a proposed increase in the limit on overseas investments in the three segments.
A draft paper on the foreign direct investment (FDI) policy in different sectors, including the ₹ 60,700 crore media industry, has been drawn up by a panel led by Arvind Mayaram, secretary of the department of economic affairs. The discussion paper, a copy of which has been reviewed by Mint, is expected to be taken up at a meeting of ministers next month. The proposals have been reported earlier by PTI and Business Standard.
The Mayaram panel has reviewed the overseas investment policy with a view to boosting FDI flows into the country by raising limits in order to raise resources and help revive economic growth which slumped to a 10-year low in the year ended 31 March.
Revised foreign direct investment caps should be in place by the second or third week of July, finance minister P. Chidambaram said on Tuesday, while reiterating that the fundamentals of the Indian economy are strong and that funds, taken out of the country following US Federal Reserve chief Ben Bernanke’s statement on the phasing out of stimulus spending, will return.
With regard to the Mayaram committee report, he said “The task for DIPP (department of industrial policy and promotion) is to quickly consult other ministries and departments who have a stake in the matter and bring a note to the cabinet," he told reporters in New Delhi.
Mayaram has recommended raising FDI caps in many sectors such as telecom and insurance and doing away with the need for obtaining the approval of the Foreign Investment Promotion Board, except for critical sectors such as defence production. If accepted, this could see many sectors opening up for long-term foreign investors and see inflows supporting the rupee, which recently weakened to an all-time low.
Private FM radio companies are pleased with the proposed raising of the FDI limit to 49% from 20% under the automatic route.
Rahul Gupta, director of Shri Puran Multimedia, which operates eight FM stations under Radio Mantra, welcomed the recommendations.
“If the proposal gets cleared, it will be great for the radio industry. It is a good time to liberalize this sector as the industry is moving towards profitability and it will need funds to expand further once Phase III starts."
Shri Puran Multimedia is owned by the promoters of the country’s largest-read Hindi newspaper Dainik Jagran that’s published by Jagran Prakashan Ltd. Under Phase III, the government has promised to allow more than 800 new stations to come up in 225 new cities.
“Geographical expansion is a must for growth in the radio industry. Only then can it emerge as a mass media medium instead of being restricted to a few cities. Currently, the industry earns ₹ 1,500 crore in advertising revenue growing at 15% a year," he said.
Katial said radio stations should also be allowed to broadcast news. They are currently not allowed to do so.
“Forty-nine percent FDI is okay with news, but without news FM stations should be allowed 100% foreign investment like it is in entertainment television," he said. Big FM operates a network of 45 FM radio stations.
If the government accepts the proposal, the sector that has barely attracted any foreign investment may become more attractive.
“At 49%, at least some serious radio companies around the world may be interested in the business in India. I really hope some of them such as the Canadian network CBC, the American CBS Radio, MediaCorp in Singapore or Radio Disney for children, look at India. There is RTL, Europe’s major broadcaster that runs a successful radio business, too," Katial said.
In India, RTL Group has a joint venture with Reliance Broadcast for a television action channel known as BIG RTL Thrill, targeted at male audiences of 15-44 years. It was launched in November 2012.
The Association of Radio Operators of India grouping declined to comment. Uday Chawla, secretary general of the association, said members need to discuss the issue internally before making a statement. “Media is a sensitive subject, " he said.
The government has to have a clearer view on radio, said Prashant Panday, chief executive officer, Entertainment Network (India) Ltd (ENIL), a Times Group company that operates 32 stations under the Radio Mirchi brand.
“The government has to first decide if radio is a sensitive sector or not," he said. “When we ask them to allow news, they say it is a sensitive sector. Now they are recommending 49% foreign investment in FM radio."
Panday said that the issues nagging the FM radio business in India are not related to FDI. Radio operators in other markets are unlikely to rush to India if the FDI cap is pushed to 49% as the sector suffers from regulatory issues that curb growth, he said. For instance, auctions announced two years ago are yet to be held. The last auction was held in 2007 and private radio has not expanded since.
“Instead of opening up FDI, they should open up the spectrum for radio. If more spectrum is released, FM radio will double in no time," he said.
In Phase III, the government is insisting on an ascending auction that will inflate costs for radio companies. That is not all. Licences of several private FM players are expected to expire in the next two to four years and Panday does not see investors entering a sector in the absence of clarity on these issues.
Still, if the proposals get the government’s approval, will ENIL allow FDI to expand its Radio Mirchi brand? “While there is no shortage of funds at ENIL, it will be a commercial decision. We have not even discussed this as it has sprung up from nowhere," Panday said.
Ravi Dhariwal, chief executive officer (CEO) of Bennett, Coleman & Co. Ltd (BCCL), which owns ENIL and publishes The Times of India and The Economic Times, did not respond to emails or text messages seeking his views on the Mayaram panel recommendations.
In the case of newspapers and news magazines, the panel has proposed raising the limit to 49% from 26%. The proposal is similar for news broadcasters—to 49% from 26%.
Mint’s publisher HT Media Ltd competes in several markets with the products of BCCL.
HT Media CEO Rajiv Verma offered no comment on the proposal. The company has a radio business besides print properties such as Hindustan Times and the Hindi newspaper Hindustan, the latter owned through a subsidiary.
Ashish Bagga, group CEO of the India Today group, which has interests in print, television and radio, did not respond to phone calls and text messages.
The proposal was welcomed by Arun Anant, CEO, Kasturi & Sons Ltd, which publishes The Hindu.
“Indians are already consuming a lot of global news through online and other media. So 49% FDI should be allowed to go through," he said.
However, he added that whether the company would invite foreign investors will be a decision taken by the board.
“Personally speaking, the move is a good one as it will make foreign capital participation and larger flow of funds possible. And yes, Indian newspapers are still attractive to foreign media companies as they are profitable and our total advertising market is still small with immense scope to grow," he said.
The company has always maintained that government should allow 49% in news channels, he said. “A 26% cap curbs investments, while 49% will encourage investors and will still allow control to be with an Indian person or company," he said.
With very few news broadcasters making money in the country, the Mayaram panel’s draft recommendations would be a boon, he said.
Rao doesn’t think foreign investors may be wary of the Indian market.
“On the contrary, news has never been really available to them. They will not mind investing in robust media companies," he said.
Sunil Lulla, CEO, Times Global Broadcasting, which operates news channels Times Now and ET Now, agreed.
“Indian capital is often shy of investing in news media for its gestation period. Foreign media companies have the experience and forbearance," he said.
Lulla said that if approved, the policy will augment the standards for news television in India.
Ashok Venkatramani, CEO of Media Content & Communication Services, an Anandabazar Patrika group company that runs Hindi news channel ABP News, agreed.
“At 49%, you can get a strategic investor, his know-how and infrastructure," he said. “It is a knowledge business so it would help to have an experienced knowledge partner."
Lulla said the question of getting foreign investors was a hypothetical one. “The decision will be subject to guidelines and other variables like right price at the right time. For now, it is highly speculative," he said.
Venkatramani said decisions on foreign investment will be made by the promoters.
Star India Pvt. Ltd, which exited last year from a joint venture with ABP Ltd in Star News, since renamed ABP News, was noncommittal about the draft proposals. “We do not wish to get back into news," said Uday Shankar, CEO of Star India.
Approximately 100 news channels operate in India, with their total advertising estimated at ₹ 2,000 crore a year.
Media experts believe foreign media companies are keen to partner Indian firms even though the industry is currently going through a rough patch.
“Despite what you may think about the health of the Indian news channel industry, where will you find a market the size and diversity of India?," said Shailesh Shah, secretary general of the Indian Broadcasting Foundation, an organization representing the interests of close to 300 news and general entertainment channels.
However, he added a caveat: “Ten months away from elections, it will be a surprise if this is done."