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Allowing 74% FDI in pharma sector may attract many MNCs to invest in India
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Swati Rana, Mumbai
June 25 , 2016
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The new Foreign Direct Investment (FDI) policy 2016 allowing 74 per cent
FDI through automatic route in pharmaceutical industry will open up the
foreign investments in pharma industry as many foreign companies are
looking for an investment in brownfield, says Veeramani, President of
Indian Drug Manufacturers' Association (IDMA).
The government has
permitted 74 per cent of FDI in brownfield or operational firms under
automatic route for pharma industry. Earlier the government had allowed
100 per cent FDI in greenfield projects.
S V Veeramani says, “The
government decision is welcome as it will attract huge investments as
they have made it in automatic route. There are so many companies in
India looking for an expansion and this decision will provide ample
opportunities to MNCs interested in brownfield investment. But the
concern is that it should not be dominated by MNC.”
Speaking from
the export point of view, P V Appaji, director general of Pharmexcil
says, “Export has special relevance with FDI. It is a good decision by
the government. When the companies export to US and EU, there are many
upgradation required. The government decision will help in sharing of
these technologies and the overseas investment will also increase.
Earlier we requested the government to allow 100 per cent FDI with
respect to export, but we are happy the government has made it to 74 per
cent for the pharma industry.”
The advantage of a brown-field
investment strategy is that the building is already constructed. The
costs of starting up may be greatly reduced and the time required for
construction can be avoided as well.
Some of the brownfield
acquisitions by foreign firms in recent years include the takeover of
Ranbaxy Labs by Daiichi Sankyo (Japan), formulation business of Piramal
Healthcare by Abbott Inc (US), Matrix Labs by Mylan (US), Shantha
Biotechnics by Sanofi (France), J K Drugs and Pharmaceuticals by Teva
(Israel), injectable business of Orchid Chemicals by Hospira (US) and
some popular brands of Universal Caps by Sanofi.
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