The government is set to allow companies holding the licence for operating private FM radio stations to hive off their FM radio business into separate entities as a proposal to this effect is likely to get the nod from the Cabinet on Thursday.

According to sources, the proposal regarding 'grant of approval to the transfer of shares by the FM radio company for the purpose of demerging the radio business has been submitted to the Cabinet for its consideration.

Over a dozen private FM radio operators, including Reliance [Get Quote] ADAG's Big FM, will stand to benefit from this move, experts say. The FM radio business of Reliance ADAG are currently under Adlabs Films [Get Quote] but it has been looking to for transferring it to Reliance Unicom Ltd, sources said.

Similarly, there are over 10 such firms like Adlabs, including BAG Films [Get Quote], and a few regional players, who are said to be looking at hiving off their FM radio operations into a separate radio company and will now benefit from this move, sources said.

"As per the current restriction, the government does not differentiate between the radio and the non-radio business of a firm that holds a radio licence but is also engaged in additional business. For revenue sharing, such a firm will have to part away with 4 per cent of its total revenue including that from the non-radio business," said an expert on the FM radio sector.

Last year, several FM radio companies, including Adlabs, had sought permission from the ministry of information and broadcasting to demerge their radio business into a separate subsidiary for better operational efficiency.

This included helping their parent companies (licence holding companies) get relief from the 20 per cent foreign direct investment cap in FM radio hampering with other business opportunities and bring clarity on the issue of 4 per cent
revenue-sharing arrangement with the government.

Currently, there are about 35 companies with FM radio licence and nearly 280 FM stations are operational so far. The FM radio business of Reliance ADAG are currently under Adlabs Films but it has been looking to for transferring it to Reliance Unicom Ltd.

"As per the current restriction, the Government does not differentiate between the radio and the non-radio business of a firm that holds a radio licence but is also engagged in additional business. For revenue sharing, such a firm will have to part away with 4 per cent of its total revenue including that from the non-radio business," said an expert on FM radio sector.

Last year, several FM radio companies including Adlabs had gone to the ministry of information and broadcasting seeking permission to demerge their radio business into a separate subsidiary for better operational efficiency, including helping their parent companies (licence holding companies) get relief from the 20 per cent foreign direct investment cap in FM radio hampering with other business opportunitues and bring clarity on the issue of 4 per cent revenue sharing arrangement with the government.