FDI ceiling in digital media may affect fundraising

The government’s decision to cap the foreign direct investment (FDI) in digital news media companies to 26 per cent is likely to hit investment activity at a time when lay offs in media industry are probably at an all time high.

The decision will also hit news aggregators such as Dailyhunt and Inshorts, a report in the business newspaper Mint said.

Dailyhunt, which aggregates news from various sources and offers content in 13 regional languages, has been a favourite among investors. After backing from Goldman Sachs, Belgian firm Sofina and Sequoia Capital, it is currently in talks with Japan’s SoftBank Vision Fund for a $150 million investment, according to Mint.

It has quoted industry experts as saying that the fundraising plans and existing capital structure may have to be significantly changed in consonance with the proposed law.

The proposed law has a lot of ambiguity as of now. Whether it will also include foreign news websites that do not have a physical presence in India is not clear.

Driven mostly by the large base of young users in India, content start-ups have attracted considerable investor interest, especially with improved data penetration.

In July this year, Mint had reported that ByteDance is also looking for an opportunity to invest in the Indian content space. It has set up a team to scout for content, social commerce and education technology companies.

Similarly, social media giant Facebook is scouting for early-stage content deals in India, it said.

However, a lot of these investment plans may not materialise because of regulatory uncertainty.