The government proposal to increase the foreign investment ceiling in the telecom sector to 74 per cent by restricting the foreign direct investment limit at 49 per cent and allowing foreign institutional investors to hold the incremental 25 per cent will result in a spate of initial public offerings in the telecom sector.

"Allowing a 25 per cent investment by FIIs in a telecom company will benefit the listed ones. As a result, more telecom companies may opt for listing in stock exchanges in India or abroad," Vikram Mehmi, CEO, IDEA Cellular told Business Standard.

He, however, did not divulge any details about whether IDEA would go in for an IPO. Investment banking sources in Mumbai, however, said the company was preparing to make a public issue at the end of this year.

Munesh Khanna, managing director, NM Rothschild said, "Unlisted companies will find it beneficial to get listed to attract FII investments. There will be a higher demand for telecom stocks. With a 74 per cent FDI, the headroom available will be far less and to that extent the stocks will be less lucrative."

Mehmi, however, commented that raising the FDI cap to 74 per cent would be more profitable for the telecom industry compared with a mix of FDI and FII. His position was also supported by some other industry experts.

Talking on condition of anonymity, one of them said, "FII investment can not be good for the long-term benefit of the telecom companies. FIIs are hot money investments, which may shift base at any period of adversity".

A number of foreign institutional investors are likely to invest in the domestic telecom scrips, looking at the robust growth the sector is witnessing these days.

At present, Bharti Tele-Ventures is the only listed company among the private telecom service providers. By the end of this year, industry experts expect, Hutch and IDEA to follow suit by the end of this year.

The pace of intra-industry consolidation is also likely to gear up, as a precursor to the listing. Hutch has recently sought the foreign investment promotion board's approval to merge its subsidiaries into a single entity. Telecom companies are expected to merge their subsidiaries before going for an IPO.

The sector may also witness mergers and acquisitions, as the smaller telecom companies expected to sell their stake, as it is not possible for them to kick off an IPO on a stand-alone basis.