Financial stress forces company to go in for retrospective pay-cut
Avesthagen, the Bangalore-based life-sciences company, has been slapped with criminal and civil suits by a group of ex-employees due to non-payment of a part of their salaries and non-submission of statutory payments like provident fund and tax deducted at source.
Avesthagen, one of the most promising companies in the biotechnology sector in India, had earlier gone on record stating they were planning to raise as much as Rs 700 crore through a public offer, has had to retract that offer and is now looking at private equity funding. Avesthagen, founded in 1998 by Villoo Morawala-Patell, is among few companies in the biotechnology space which has been a good amount of private equity funding to the tune as much as more than Rs 200 crore from the likes of Tata Group, Godrej, French major Danone and Cipla among few others.
Avesthagen focusses on the convergence between food, pharma and population genetics leading to predictive preventive personalised healthcare. The business model of Avesthagen is to combine IP & product development through in-house research and collaborations. Avesthagen has built and continues to build an integrated, systems biology approach of capabilities, products, infrastructure and technology that allows for and facilitates ‘cross talk’ between numerous disciplines, leading to solutions.
The financial stress has also forced the company to go in for retrospective cut of salaries for its staff which the ex-employees say is in violation of the terms of employment contract. By end of last year, Avesthagen had told its employees that they are adopting certain limited measures to reflect and appropriately manage business realities at Avesthagen.
“These measures are necessary at Avesthagen to manage various financial challenges and are no different than those taken by many firms and even nations around the world,” the letter said. When Business Standard contacted Ms Patell on the cases filed by the ex-employees, she said there are some issues with some ex-employees. “We are a privately-held company. It is an internal matter and all are on the path of being settled,” she said.
However, the ex-employees who have filed FIRs by end of March 2012, said they have been having discussions with the management of Avesthagen, but nothing has fructified. It is also learnt that Avesthagen is in negotiation with its bankers — Axis Bank and Oriental Bank of Commerce, on some aspects of debt. “Most companies constantly have discussions with their bankers on various aspects of debt and similarly, we have also had discussions with ours. There is nothing alarming on such discussions,” Ms Patell added.
Dwelling on the financial situation of Avesthagen, Vijay Chandru, who is on the board of The Association of Biotechnology Led Enterprises (ABLE) said Avesthagen is a classic company which relies heavily on IP. “Purely innovation-led companies, working on IP-based strategies are facing difficulties in attracting capital,” Chandru, an acclaimed name in the biotechnology sector, told Business Standard.
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