US-based Merrill Lynch, Lehman Brothers, Kishore Biyani's Indivision and Standard Chartered Private Equity are in the race to buy a minority stake for $40 million (around Rs 170 crore ) in Neeraj Roy and billionaire Rakesh Jhunjhunwala-promoted Virtual Marketing India.

VMIL officials declined to comment on the development. According to sources close to the development, VMIL will sell stake to raise money for expanding Hungama, the content and mobile services arm.

The Mumbai-based company has already held two to three rounds of meetings with these private equity investors. The company's valuation has been pegged at Rs 800 crore (Rs 8 billion).

The funds raised would be used for Hungama's expansion. The company plans to expand to 70 countries by the end of this year from the current figure of 30. Apart from the promoters, Anil Ambani-promoted Reliance Capital [Get Quote] also holds a minority stake in the company.

Hungama recently announced three key senior appointments to strengthen its business operations in South Asia.

The company specialises in the promotional marketing, events and promotions, entertainment marketing and customer relationship management.

The company owns and operates Hungama.com and Bollywoodhungama.com. Hungama.com has content catering to e-promotion, gaming, contests, Hollywood Hungama and trivia. The company, helped by the acquisition of Bollywoodhungama.com in 2000, reaches out to over 10 million non-resident Indians and people of South Asian origin in 127 countries.

Hungama Mobile, one of the fastest growing units, focuses on providing commercial messaging services.

Almost 21 million mobile users access the company's shortcode messaging service in India. Hungama Mobile has a collaboration with over 50 mobile carriers in 20 countries.