FIPB nod to four pharma investment proposals

The go ahead has brought some relief to sector as almost 50 pharma proposals awaiting approval

Four proposals, for investment in existing pharma companies, were cleared by the foreign investment promotion board (FIPB) during its meeting on May 10, according to a finance ministry statement issued today.

Though these are mostly transactions between non resident indians (NRIs), with little impact on ownerships, the nod has brought some relief to the sector, as 50 pharma proposals are awaiting  approval. The proposals that got the FIPB nod last month include two from Mylan Laboratories and one each from Terumo Mauritius Holding and Medreich. Of this, only Terumo Mauritius’ proposal involves foreign direct investment of Rs 90 crore in an existing pharma company to raise foreign equity participation from 74 per cent to 100 per cent.

This comes in the wake of department of industrial policy and promotion (DIPP), the nodal ministry looking into FDI, directing FIPB not to clear any of the pharma sector proposals. Though India allows 100 per cent FDI in the pharma sector, proposals in existing pharma companies now require an FIPB nod.

The move is aimed at taking precautionary measures while allowing foreign investments in brownfield projects as a spree of acquisitions in the past triggered concerns among industry players as well as the government about enhanced multinational monopoly resulting in increased medicine prices in the country.

To address such fears, the government last year made a distinction between investments in greenfield and brownfield companies. But, the move led to differences between various ministries over the norms for clearances of brownfield investment proposals, resulting in delay in approvals. 

“Most of these proposals are NRI to NRI investments and therefore DIPP asked FIPB to clear them as these did not involve any ownership related issues in India,” an official said. Besides, the two proposals from Mylan are into manufacturing facilities and hence, do not have issues linked to domestic market.

In 2008, Daiichi Sankyo of Japan had bought Ranbaxy for $4.6 billion. Following that, US-based Abbott Laboratories acquired Piramal Healthcare's domestic formulation business in 2009 for $3.7 billion. Other such acquisitions include, Mylan buying Matrix Lab, while Dabur Pharma was acquired by Singapore's Fresenius Kabi. Sanofi Aventis also purchased Shanta Biotech. Since April 2000, nearly 50,000 crore FDI has come into the pharamaceuticals sector, making it one of the top five sectors preferred by foreign investors.