Foreign fund cap in cable TV to be increased to 74%

Written by Ashish Sinha | Timsy Jaipuria | New Delhi | Updated: Apr 4 2012, 09:04am hrs
After months of hectic consultations among various ministries, the decks have been cleared for increasing the foreign investment cap for cable television from 49% to 74%. The news has come as a relief to the cash-strapped Indian cable distribution companies that have already committed and exhausted their funds for digitisation in the four metros.

Officials in the department of industrial policy and planning (DIPP), the nodal department for handling issues related to foreign direct investment (FDI), said approvals from home and I&B ministries were required, which have been obtained. The Cabinet is expected to take the matter for consideration shortly. Foreign investment cap in cable sector will be hiked to 74%, a DIPP official said.

As a result, foreign investment cap for digital cable operations will go up from 49% to 74% while the FDI cap will also move up to 49% (within 74%) from the current 20% (within 49%) level. Also, all foreign investment proposals up to 49% in an Indian cable company will not require foreign investment promotion board (FIPB). The FDI component will go up to 49%. Moreover, only proposals exceeding 49% and up to 74% will need the FIPB nod. For analogue cable firms, the cap will continue to be at 49%, said another official.

As a result, BSE-listed multi-service operators (MSOs) like Hathway Cable & Datacom, DEN, WWIL and others will now get enough headroom to rope in overseas private equity investors. These cable firms have already committed close to R1,000 crore towards digitisation in New Delhi, Mumbai, Chennai and Kolkata and will require funds to roll out the digitisation process in the rest of the country.

The hike in the FDI cap to 74% will certainly give more headroom, though its impact will only be felt after the Phase I of the digitisation (covering the metros) is over, Hathway Cable & Datacom MD and CEO K Jayaraman told FE. According to Jayaraman, Hathway is fully geared up to meet the June 30 deadline for metro digitisation and has committed R300 crore towards set top boxes, digital headends and other capital expenditure. We will bundle broadband with digital cable for Mumbai and parts of Delhi. We will also double the channel capacity to 400 in Delhi and Mumbai, Jayaraman added.

However, with the cost of pan-India cable digitisation pegged at over R20,000 crore, experts said that local cable firms will need overseas investments. International investors and cable firms like Comcast, Macquarie, Blackstone, Providence, KKR, IVFA among others are keen to participate in the growth-phase of Indian cable sector, experts said. Therefore, the hike in FDI cap was much needed and a step in the right direction, said an analyst who tracks media firms.