VCs not falling for Indian biotech industry

By agencies   |   Wednesday, 03 May 2006, 19:30 IST
Printer Print Email Email
NEW DELHI: Millions of dollars of VC funds are chasing biotech companies worldwide, but in India these are still trickling in. While venture capital funds invested around $3.32 billion in U.S in biotech firms last year, in Europe it amounted to $1.74 billion. However, for India, industry estimates suggest that a scanty $200 million of VC funding has been pumped till date. Biocon CEO Kiran Mazumdar-Shaw feels, "There is a natural hedge in terms of cost base which would translate to a comparable $1 billion VC investment in U.S and Europe." According to her, the reasons for low VC interest in Indian biotech industry is the low cost base and also because angel funding and soft loans have met funding needs of smaller firms. Analysts say that “Early stage VC continues to be a problem in India. To begin with, the size of ventures is not very large, thereby making it unattractive to most VCs. Moreover, exit routes are not well defined and viable business models are still nascent. Utkarsh Palnitkar of Ernst & Young India says, "Foreign firms are increasingly recognizing the latent Indian biotech potential, resulting in many outsourcing partnerships evolving into equity investments. However, the high risk factor has deterred active flow of VC into the sector.” Ravi Sardana, Vice President, ICICI Securities says, "The small size, risk profile and long gestation period has kept venture funds from investing in Indian biotech. The industry needs seed capital in the form of an incubation fund for facilitating financing on a larger canvas."

siliconindia