MUMBAI: The Foreign Investment Promotion Board (FIPB) has rejected the proposal of Hyderabad-based Associated Broadcasting Company Ltd (ABCL), which runs a clutch of regional news channels, to give stake to Mauritius-based private equity fund Saif III Mauritius Company, ahead of its broader fund-raising plans including an initial public offering (IPO).

Saif, a subsidiary of Tokyo-based Softbank Corp, was to effectively hold around 14.5 per cent for around Rs 510 million, valuing the news broadcasting company at Rs 3.5 billion.

“This is part of our broader fund-raising plan. Saif has investments in other broadcasting outfits (Network18 Media and HomeShop18) and our valuation would go up. It will be a precursor to an initial public offering (IPO) or a private placement as we pursue our expansion plans,” a source in the company said.

ABCL operates six news channels including TV9 AP (Telugu), TV1, TV9 Karnataka, News9 English (Bangalore), TV9 Gujarat, and TV9 Mumbai (Hindi).

“We will need funding for our expansion programme. After running a successful fleet of regional news channels, we are looking at a national news channel in the Hindi space,” said the source.

Post Saif’s investments, iLabs and Unified Group will have around 65.5 per cent stake in ABCL, down from the current 80 per cent, the source added. Ravi Prakash will have 10 per cent and the other 10 per cent is allotted in form of ESOPs.

ABCL has decided to file a revised proposal to get the FIPB nod. In its earlier application, it had sought merger of a company that is controlled by Saif with itself. It would have issued and allotted compulsory convertible preference shares on the date of completion of the merger.

The company will also approach the court for approval of the amalgamation scheme.

According to the source, Saif had taken almost entire ownership of iVision Media India for around Rs 510 million. iVision Media India, owned then by the promoter of iLabs, was into the news agency business but had gone dormant. Saif had invested to revive the company.

Later, ABCL took around Rs 510 million as a loan from iVision. The condition was that it either pay back the amount to Saif or part with equity.

“Our intention now is to amalgamate iVision with ABCL and part with around 14.5 per cent equity. We will do that once we get the FIPB approval,” the source said.

ABCL is expecting to post a revenue of Rs 1.3 billion for the fiscal ended March 2011, up from Rs 1 billion a year ago.