Bangalore: Pharmaceutical companies are predicted to draw more PE funds in 2012 but IPO or stock market launch is quite reluctant. Utkarsh Palnitkar, Executive Director of Centrum Capital, which is a boutique corporate advisory and investment firm said, “The options to raise funds are limited as the IPO window is closed… Domestic consumption is going to be a main theme. In next 4-5 years we will see lot more deals in domestic consumption.”

Earlier the PE investment trend was backed because of mergers and acquisitions (M&As) in this sector but in recent years it has risen. The average PE deal value for pharmaceutical sector was $6 million in 2009 and $200 million in 2011, and it predicted to hike more in 2012 as well. According to an online financial research platform, VCCEdge, the PE deal volume in this sector has increased from 2 to 7.

Aduri Srinivas Rao, MD of Morgan Stanley PE, India said, “It’s going to be good time for private equity because there are no IPOs happening. People with good plans cannot wait for one year, they will raise money. The numbers of deals are going to be higher than what it was last year.”

Nitin Deshmukh, CEO – PE, Kotak Investment Advisors said, “There is excess money in the market. Also because of large valuations as deals were not going through. So capital is available for funding.”

 “Consumption driven firms will generate interest of private equity. When the market is growing at 15-16%, companies which are able to carve out realistic market share in that will attract money,” said Palnitkar.

 “Marketing innovation and product innovation are the other two areas where the money will go,” added Rao.

Sanjiv D Kaul, MD of Chrys Capital said, “Investments are coming in for small sized companies as there is lot of scope to make cash in smaller companies.”

But analysts are also poking the drawback of indulging PE funds by saying that it may harm the domestic market of these pharma companies.