The government's decision to allow foreign direct investment in private FM radio is likely to trigger foreign investment inflows of Rs 200 crore (Rs 2 billion) in the next 18 months.
According to analysts, the liberalisation of the FDI policy in this sector will result in a number of new companies entering the business.
"The decision taken by the government will see a new set of players entering the business," said an executive with Red FM.
AP Parigi, chief executive officer, Entertainment Network, said, "Radio Mirchi will expand its reach to other cities and will endeavor to retain its premier position in India. There is need for substantial investment to expand the network of Radio Mirchi in India."
FM radio companies are also expected to benefit substantially from the government decision to move from the current licence fee model to a revenue-sharing one. It is expected that the regulatory fee outflow will come down by as much as 50 per cent.
Last year, private FM radio companies had paid a licence fee of about Rs 130 crore (Rs 1.3 billion), which resulted in a loss of Rs 200 crore (Rs 2 billion). The total revenue earned by them was just Rs 110 crore (Rs 1.1 billion).
The government move is likely to provide Indian radio stations access to a new genre of content through tie-ups with foreign radio companies.
"While we are awaiting details about the government's announcement, one will now see significant changes in content, genre and demographics," said Abraham Thomas, chief operating officer, Red FM.
As a result, other companies are likely to enter the FM radio business. One of them is HT Media, which has a memorandum of understanding with Richard Branson's Virgin Radio.
Market sources pointed out that Virgin Radio would look at entering the Indian market through its HT Media radio venture.
According to Ambar Basu, vice-president, finance, Radio City, the new policy will certainly help multiple radio stations in delivering segment-relevant programmes to targeted audiences in local areas. Radio City has already stated its desire to expand to 25 cities.