FDI in pharma to boost mergers and acquisitions, say experts
Govt’s decision to increase FDI to 74% in
existing pharma companies is expected to boost mergers and acquisitions and
private equity investments in the sector.
The government’s decision to increase
foreign direct investment (FDI) to 74% in existing pharmaceutical companies
through the automatic route is expected to boost mergers and acquisitions
(M&As) and private equity investments in the sector in future, said experts.
Allowing FDI beyond 74% will continue
through the government approval route. Earlier, 100% FDI was permitted through
the government approval route. The government has also allowed 100% FDI under
the automatic route in greenfield pharma.
India’s pharmaceutical market may reach
$20 billion this year and about $55 billion by 2020 from about $18 billion as
of 2014, clocking a compounded annual growth rate (CAGR) of over 22%, according
to a joint study by the Associated Chambers of Commerce & Industry of India
(ASSOCHAM)-TechSci Research released in June.
“Keeping the cost of production low in
India and with high pricing in the US, the margins Indian generic firms make
are very high. Even the branded generics market in India has high margins. I
believe there is a lot of synergy in cross border deals and with this FDI
proposal, it will increase the number and size of deals,” said Ameera Shah,
managing director and chief executive officer, Metropolis Healthcare.
“This
is a welcome change for global pharma players looking at establishing a
presence in India but not looking for a 100% stake. Some foreign investors
actually prefer having local partners, and this change will facilitate those
deals,” said Sameer Sah, associate partner, Khaitan & Co.
“The new FDI norms are steps in the
right direction. They will stimulate more M&A and investment in CRAMS
(Contract Research And Manufacturing Services). We need to now streamline
regulations, particularly Drug Price Control Orders (DPCO),” said Kewal Handa, industry expert and former
managing director of Pfizer India.
Source: http://www.livemint.com/Companies/UuPjuc77Bqn4ZcxITQj4xK/FDI-in-pharma-to-boost-MAs-PE-investments-say-experts.html
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