No non-competition clause in pharma FDI: RBI

The Reserve Bank of India has said non-compete clauses will not be allowed for foreign direct investment in the pharmaceutical sector, except in special circumstances.

This follows a review of the policy, it said, with a consensus that the clause allowing foreign investors to take 100 per cent equity stake in pharma companies could continue.

Non-compete clauses are common in mergers & acquisitions, where the sellers agree not to launch a business in the same domain.

In January, too, the department of industrial policy and promotion issued a statement that non-compete clauses will require special permission.

In the recent past, the pharma industry has seen large inbound buyouts. US-based Abbott had acquired the domestic formulations business of Piramal, Mylan acquired Strides Arcolabs and the latest was the $3.2-billion acquisition of Ranbaxy by Sun Pharma.