VCs take a fancy to biotech sector

The Indian biotechnology sector, which lagged behind that of China and Korea despite its high skill base owing to the absence of investment flow, is seeing increasing interest from institutional investors and investment bankers of late.

Several global and domestic investment institutions and banks such as 3i, APIDC, Axis Holdings, Chrys Capital, ICICI Venture, Kotak Mahindra, Nadathur Holdings, New Enterprise Associates, UTI Venture Funds, Yes Bank, among others have now earmarked investment options for this emerging industry.

The sector, which saw a total investment of about Rs 600 crore as in March 2006, mainly in the area of life sciences, is steadily growing, as the investor community has identified it as one of the most promising industries.

According to industry sources, the sector is set to receive an additional investment in the range of Rs 3000-3500 crore in the next two years, which includes funding by leading venture capital companies, private equity funds, investment bankers and various government schemes.

Industry analysts point out that the investment in the Indian biotechnology is witnessing a three-digit growth for the last two years, as a few leading investment bankers and venture capital companies have put in their investments in a number of potential projects and promising start-up ventures.

"The investment in the Indian biotech sector crossed $125 million in 2006, a growth of 150 per cent over the last year," they said.

According to Alok Gupta, country head, life sciences and technologies, Yes Bank, the biotechnology sector is seeing interesting and novel models of funding.

"This is an interesting trend which will play a key role in the overall growth of the Indian biotech sector," added Gupta.

K K Narayanan, president, Association of Biotechnology Led Enterprise (ABLE), the key industry body in the sector, and managing director of Meta Helix Life Sciences, said, "With significant growth in investments over the last couple of years, the Indian biotech industry is well on track to be of some reckoning globally."

However, industry analysts added that India, despite its strong knowledge base, did not progress in biotechnology entrepreneurship, as there was lack of investment coming from the investor community as it happened in other sector.

"But, fortunately there are some initiatives now taking place from the industry to create awareness about the promising investment opportunities in the biotech sector," they said.

For instance, ABLE has been conducting interactive conferences and seminars in association with investment companies to make the stakeholder aware of the new opportunities for growth.

"In order to facilitate deeper understanding of these opportunities, the association is also planning a major workshop, Bioinvest 2006, in association with leading investment companies in November this year in Mumbai. The coming together of the key stakeholders will further spur the growth of investments in this sector," said Narayanan.

Nitin Deshmukh, head, private equity, Kotak Mahindra Bank, and director of ABLE, said the life sciences companies are also reinventing their business models and are moving to innovation-led research products, realising that in order to attract VC funding, companies have to focus on innovative technologies and drug discovery."