MUMBAI: Zee News Ltd (ZNL) has moved the Foreign Investment Promotion Board (FIPB) to seek clearance on foreign shareholding, which would not exceed 26 per cent as per government norms for news ventures.

The company is seeking government clearance under a proposal wherein foreign promoters of Zee Telefilms Ltd (ZTL) will be transferring their foreign holdings to an investment company in India.

As part of a restructuring, ZTL had proposed to spin off its news and regional channels into ZNL to comply with uplinking regulations on foreign holdings in news channels, which are capped at 26 per cent.

The FIPB application of Zee News specifies, “Issue of 42,467,291 equity share of the company to the foreign promoters of ZTL, that is M/s Delgrade Ltd and Lazarus Investment Ltd, which would be transferred to the Indian promoters of ZTL on allotment, that is to M/s Jayneer Capital Pvt Ltd.”

The foreign holding of promoters in Zee Telefilms is primarily through Delgrada Ltd, which has 19.98 per cent stake. Delgrada is an overseas corporate body (OCB) owned by the Zee Telefilms promoter Subhash Chandra. The balance 2.79 per cent is held by Lazarus Investments Ltd.

The shares to be issued to foreign financial investors (FIIs) in ZNL will have to fall within the 26 per cent cap also. The foreign shareholders will, thus, be given preference shares of equivalent value to bring it under limit. Along with this, the promoters' foreign holding will be transferred to an investment vehicle (Jayneer Capital Pvt Ltd) in India.

Jayneer Capital Pvt Ltd is one of the Indian promoters of ZNL and holds 40 per cent equity stake in ZNL, while 25 per cent is held by another Indian entity, Churu Trading.

As per regulations, Indian shareholding of 51 per cent is mandatory in a TV news venture uplinking its channel from India. After the completion of the de-merger and transfer of shares, Indian promoters will be able to hold the mandated percentage in ZNL, an executive of Zee News admitted.

As per a plan submitted to the government, every 100 shares of Zee Telefilms would fetch 45 shares of Zee News. Additionally, for every 100 shares of Zee Telefilms held by FIIs, 1,781 preferential shares of Zee News would be allotted.

At the time of listing, the entire shareholding of FIIs and Zee Telefilms in Zee News would get transferred to Indian shareholders of Zee News. The company is looking at becoming a public company by November-end by which time routine clearances for the Zee Tele de-merger would have come from the Bombay High Court.

Zee News, which manages news and regional channels of the Zee group, is targeting a turnover of Rs 2.5 billion this fiscal.

Earlier, this year, the Zee Telefilms board approved splitting of its broadcasting business into three entities --- news operations, broadcast and content creation and cable distribution. DTH service of Dish TV is undertaken by another Chandra company, ASC Enterprises.