MUMBAI: Adlabs Films Ltd (AFL) board has approved the proposal for demerger of its FM radio business to a wholly owned subsidiary.

According to the scheme, the shareholders of Adlabs will get two shares of the new company for every new share held. The new entity will be listed on the stock exchange, the company said in a release.

The scheme also envisages amalgamation / merger of two AFL subsidiaries, Entertainment One India LTD and Mukta Adlabs Digital Exhibition Pvt LTD, with itself. "The aforesaid scheme will be subject to all requisite permissions, sanctions and approvals including, inter alia, of share holders, lenders, stock exchanges, High Courts, regulatory authorities," the company said in a release.

Adlabs had made its debut in film production in the year 2002 through its 100 per cent subsidiary Entertainment One India Ltd. A year later, the company entered into a 50:50 join venture with Mukta Arts for digital delivery of movies.

Adlabs board has also recommended a dividend of 45 per cent (Rs 2.25 per share) for the year ended 31 March 2006, subject to approval at the ensuing annual general meeting.