MUMBAI: Aroon Purie-promoted Radio Today Broadcasting is planning to dilute 20 per cent equity to a foreign strategic investor, following a template that other FM radio companies in India are keen to adopt.

Radio Today is in active talks with overseas media companies as it prepares to launch the FM stations in the three metros of Delhi, Mumbai and Kolkata in March. The Living Media group company has won licenses paying a fee of Rs 280 million to operate in seven stations in the second phase of FM expansion after selling Red FM to a clutch of investors comprising infotech company Value Labs, Malaysia-based Astro and NDTV. Red FM was operating in the circles of Delhi, Mumbai and Kolkata.

"We feel we will discover the real value of our radio business by roping in a foreign strategic investor. We are ready to sell 20 per cent stake and are in discussions with a couple of companies for this," says a source familiar with the deal. A maximum of 20 per cent foreign holding is allowed in radio companies in India.

Bertelsmann and CBS are among the foreign majors who have yet to make an entry into India. The source, however, declined to name the companies which are in talks with Radio Today.

TV Today Network Ltd, which owns a slew of channels including Aaj Tak and Headlines Today, has a 10 per cent stake in Radio Today. "There is no plan to up the stake. But with a 10 per cent holding, TV Today will capture the value when a partner is roped in for Radio Today which will get reflected in the scrip price," the source says.

Foreign companies are showing interest to participate in India's FM radio business that is set for rapid growth. Mid Day Multimedia sold stake to BBC Worldwide in its radio venture while Hindustan Times Media has tied up with Virgin. Star is awaiting FIPB (foreign investment promotion board) approval to acquire a 20 per cent stake in Music Broadcast ( the company which operates under the Radio City brand), marking a re-entry into the FM radio business. The US-based Balfour Capital LLC is also investing in Noble Broadcasting Corporation, the FM radio-arm of the Chennai based Kumudham Publications.

Investors are drawn in by the prospect of radio stations appealing to youth audiences and tapping local advertising. As reported first in Indiantelevision.com, IDBI picked up a 10 per cent stake in B.A.G Infotainment, the subsidiary of B.A.G Films which is engaged in the radio business.