MUMBAI: Information & broadcasting minister Jaipal Reddy today signed a note allowing foreign institutional investors (FIIs) to invest in television news channels.

The note prepared by the I&B ministry puts the total cap on foreign holdings (FII and foreign direct investments) at 26 per cent. The development validates a report first put out by indiantelevision.com on 22 September under the headline "Govt may allow FII inflows in news channels."

The I&B ministry is likely to seek cabinet approval for the proposal before October-end. It may be recalled that the government had made it clear that FIIs would not be allowed to invest in news channels in the aftermath of the Star News case. News channels were given till 31 October to meet the government's uplinking conditions.Market analysts see the I&B's move to allow FII investments in news channels as having a positive but limited influence on media stocks. The big gainers, of course, are TV Today Network and NDTV, as they currently have hardly any FII holdings.

"FIIs had shown keen interest to invest in TV Today and NDTV in the past, but were not permitted. Aaj Tak and the two NDTV channels are performing well. The stock price will see a boost," says an analyst in a leading foreign institutional firm.TV18, on the other hand, may not gain substantially with the permission to allow FII investments, a market analyst says. The company has 15.39 per cent FII holding.

What is not clear at this point is whether the easing of foreign investment norms will help clear a regulatory logjam that business news channel CNBC-TV18 has been confronting since late last year that over CNBC's attempt to increase its holding.

The Foreign Investment Promotion Board (FIPB) had in December last year turned down a proposal from Television Eighteen Ltd. to offload 15 per cent equity stake in its uplinking subsidiary to CNBC Asia. The FIPB did this on the recommendation of the I&B ministry.

Television Eighteen's uplinking subsidiary that uplinks the CNBC-TV18 channel from India is iNews.com. CNBC Asia holds a 10 per cent stake in iNews.com.

A question mark remains however, over the Zee Group's Hindi news channel. Zee Telefilms already has an FII holding of 36.75 per cent. The company has already applied for the restructuring of its Zee News channel and is awaiting clearance. "Zee Telefilms can't hold the news channel as it has a substantial foreign holding," says an analyst.