FM radio broadcasters have been allowed some structural leeway in the phase II policy for private broadcasters. The Union cabinet has allowed the Information and Broadcasting ministry to permit FM companies to create subsidiaries or go in for merger, demerger or amalgamation by way of transfer of shares.

With certain riders in the new FM policy of course, Televisionpoint.com asks the radio industry executives about the development, which will have an positive impact on the financial’s of FM stations in the near future.

There is an overriding caveat though that in the first five years of operation of an FM channel, a broadcasting company cannot change its ownership pattern. Firms with FM channels that have been around for less than five years can benefit from the relaxation provided they fulfil certain conditions.

The primary of the conditions is that the majority shareholders or promoters would continue to remain so. Together they should hold at least 51 per cent and also maintain the FDI component within the prescribed 20 per cent limit.

According to private FM players, the new policy is a clear indication of things to come. They see this as a run-up to the next round of policy change in which the FDI limit will be raised.

Apurva Purohit, CEO, Radio City, and president, the Association of Radio Operators of India, said “The latest relaxation would pave the way for further deregulation by way of increased FDI, multiple licensing and permission to carry news and current affairs on FM radio. We hope that the government expedites the process.”

Anil Srivatsa, CEO, Radio Today, said, “It is like making the bed before you sleep in it. The next step would be to increase the FDI limit and this is in preparation of that. When this was a new business companies suffered losses and an erosion in their net worth. They can now restructure their cumulative losses and make more investments.”

“Another problem cropped up if an FM operator was part of a larger business of a company. It had to give the government four per cent of the revenue of the entire business of the company, and not merely a share of the revenues from FM operations. They will now pay a share of only the FM revenues. If they want to expand, the four per cent clause won’t come in the way.” explains said Harrish M Bhatia, business head, My FM.

Himanshu Shekhar, regional head, north and west, Big FM, said, “We are happy with the decision taken by the Cabinet today. This is a step in the right direction. It would help companies having multiple businesses carve out the radio business into a separate legal entity. Being an independent legal entity, it would have financial flexibility to raise resources for future growth. Valuation of the FM radio business on stock exchanges would help substantial unlocking of shareholder value.”

For players like Fever 104, the policy relaxation is irrelevant. “Our rights are held in a separate company. So it does not affect us in any way,” said Kirti Vasan, business head, Fever 104.