FIIs set to pick 20% in Reliance Broadcast

Reliance Broadcast Network (RBNL), the radio, broadcast and outdoor business arm of the Reliance Anil Dhirubhai Ambani (ADAG), is set to sell 20% stake to a clutch of foreign institutional investors (FIIs) from Mauritius and Singapore. These include Goldman Sachs, Citigroup Global, Alchemy India Long Term Fund and non-resident Indians, sources close to the deal told FE.

The move to raise money from FIIs will leave RBNL with a healthy cash position of around Rs 300 crore. According to company insiders, RBNL will use the funds to expand its presence in the broadcast business (via JV with CBS) and also to fund the third-phase of private FM radio. RBNL is currently the largest private FM radio operator in the country operating 45 FM stations.

In order to raise money from the overseas investors, RBNL will issue 5.3-5.4 million equity shares to the FIIs at a price of Rs 85 per share taking the total inflow of foreign investments to around Rs 46 crore, At this rate, the radio business of RBNL will be valued at around Rs 230 crore.

Sources said, of the FIIs Citigroup Global may hold over 6% stake in RBNL while Goldman Sachs Investment may hold around 5% stake. RBNL also proposes to sell around 2% stake to a non-resident Indian.

?Since RBNL operates its FM radio brand Big FM, where the current FDI cap is 20%, it will have to seek the government?s approval for a 20% stake sale,? a person familiar with the proposed transaction said.

RBNL will now have to approach the foreign investment promotion board (FIPB) to seek its approval as foreign investment in the FM radio sector requires a mandatory FIPB approval.

This comes on the back of RBNL raising Rs 283 crore by preferential allotment of 33.32 million equity shares recently. As of September 30, the promoters? holding in RBNL stood at 63.66%, up from 61.47% in the period ended June 30. However, sources said post allotment of equity shares to FIIs and NRIs, the promoters holding may come down to around 59% while the non-promoters holding will go up from 36.34% to a little over 40%.

While the company will also operate its upcoming broadcast business under the umbrella of RBNL, over 70% of its revenue is generated by the FM radio business. According to RBNL, Q2 has been one of the best quarters for the company so far. The revenue for FY 10-11 period (April to September 2010) stood at Rs 110.51 crore.