M&As to be an active ingredient in pharma

Analysts are happy that deals involving FDI of less than 74 per cent can be sealed in quick time

June 21, 2016 02:32 am | Updated December 04, 2021 11:02 pm IST - MUMBAI:

With 100 per cent foreign direct investment (FDI) in pharma, mergers and acquisitions (M&A) by multinational companies are likely to intensify in the sector, attracting a sizeable amount of funds, analysts said.

The Union government decided to allow 100 per cent FDI under the automatic route in greenfield pharmaceutical projects and under government approval in existing companies, or brownfield pharma — FDI under the automatic route in brownfield pharmaceutical firms would be 74 per cent.

Enhanced investments

“The new norms will enable enhanced investments [in the form of M&As] from multinationals, which believe in the growth potential of the domestic pharma industry. We remain positive on the sector,” said Sarabjit Kour Nangra, vice-president, research pharma, of Angel Broking.

Anand Mehta, partner, Khaitan & Co, said, “For private companies, this will allow promoters to monetise part of their shareholding easily should they choose to do so. The Foreign Investment Promotion Board process used to add to timelines; deals will now close much quicker.”

India presence

Sameer Sah, associate partner in the firm, says, “It is a welcome change for global pharma players looking at establishing a presence in India but not looking for a 100 per cent stake. Some foreign investors actually do prefer having local partners, and this change will facilitate those deals.”

Several pharmaceutical companies that The Hindu spoke to declined to comment, but all of them said this was a huge positive for the sector.

“The pharma sector has been witnessing heightened activity in the recent past, and this change should help reduce timelines for deals involving FDI of less than 74 per cent equity stake,” said Kalpesh Maroo, Partner, BMR & Associates LLP.

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