India’s pharmaceutical sector is well positioned to attract FDI
How has the pharmaceutical sector in India succeeded in attracting foreign direct investment?
The government’s concerted push towards the pharmaceutical sector through initiatives such as Make in India, Ayushman Bharat Scheme, National Digital Health Mission, etc., has consolidated India as the world’s leading capital market. The total market size of the Indian pharmaceutical industry is expected to reach $ 130 billion by 2030. And with access to large consumer markets, the creation of new employment opportunities, the increase in research and development. development and increase in net income in foreign currency, the Indian, also as foreign companies, bet big on the sector. The cost of manufacturing in India is about 33% lower than in the United States, making it a good market for investors to invest more in the country. The increase in FDI inflows reflects the firm belief of global investors that India will be one of the main engines of growth, coupled with a steady wave of market reforms. The pharmaceutical sector is well positioned and attracts FDI and exploits the many opportunities created by COVID-19.
Can you give a ranking between the sectors?
In my opinion, these are industries that are currently “hot-bed” for investments.
3. Construction development
What role have policies like Make in India, etc. when it comes to attracting foreign capital?
Dedicated efforts on the part of the government through initiatives such as Make in India has certainly stimulated foreign investment. The government has taken many measures to cut costs and lower health care costs. The Indian government has unveiled “Pharma Vision 2020” to make India a world leader in end-to-end drug manufacturing. The approval time for new installations has been reduced to stimulate investment. The recent government-announced Production Incentive Program (PLI) initiative for the pharmaceutical industry worth Rs 15,000 crore ($ 2.04 billion) will also promote domestic manufacturing of essential raw materials ( KSM), pharmaceutical intermediates and active pharmaceutical ingredients (API). ) making India a leading supplier. In addition, the push on rural health programs, life-saving drugs and preventative vaccines also bodes well for pharmaceutical companies.
Has there been a change in sentiment for FDI after the COVID-19 pandemic, as pharmaceutical and vaccine companies in India have scaled up supply chains from drugs to vaccines to PPE to exports after meeting national needs?
The crisis caused by the COVID-19 pandemic has definitely changed the sentiment of FDI. The pharmaceutical sector has attracted much of the global attention, with many global players choosing to move their businesses out of China, and hence India, with its growing market and economic workforce, intends to be a competitor of choice. India has a clear advantage in this area and the Indian government is also pushing for reforms and rolling out the red carpet for companies wishing to invest in India.
You founded FDI India in 2015. How many FDI transactions / value has been facilitated over the past six years?
FDI India strengthens the financial strength of its clients by keeping them in the investment lifecycle, from pre-investment to post-care. Through our platform, we help Indian businesses obtain loans seamlessly and hassle-free as well as an easy way to generate inquiries and secure investment from foreign investors. So far, we have facilitated 10-12 transactions in pharmaceutical companies including companies such as drug manufacturing, API device manufacturing, medical devices, etc.
Which countries are part of FDI India’s network of potential investors?
Our network of potential investors is spread across 15 countries including Singapore, Malaysia, Australia, UK, US, Germany, Italy, Canada and Ireland, among others.
What is the average size of investment tickets in the pharmaceutical sector that FDI India has facilitated?
We have enabled pharmaceutical companies to obtain concessional loans with a minimum ticket size of Rs 50 crore.
I can understand that you cannot share confidential information about your past, present or potential transactions, but can you give illustrative examples to demonstrate the impact of the beneficiary (the company receiving the IDE) and the return on investment for the investor?
We have been working with companies in the pharmaceutical sector since our inception. The experience was quite enriching and successful. We have been working with a drug manufacturing company for four years now and it has seen significant growth year on year. The deal was a remarkable success for the investor, so much so that he has since invested in companies in the pharmaceutical sector, due to the growth of the pharmaceutical market, liberalized government policies, ease of doing, etc. .
Another such example is the API manufacturing company that has been associated with us for two years now which has also seen double digit revenue growth and the ROI for the foreign investor has also increased by 2X. since the government’s announcement of API manufacturing in India to be done on a large scale. The market potential has certainly had a positive impact on the beneficiary and an induced return on investment for the investor.
The ease of doing business in India has improved but is still not optimal. How has this impacted FDI flows and how does it impact the services provided by companies like FDI India which will have to overcome investor reluctance?
Actions taken by the government on the FDI policy and ease of doing business reform fronts have resulted in an increase in FDI inflows. He has helped companies like FDI India overcome investor reluctance. Through our range of services, including financial planning and assistance, connecting to the right investors and project planning, we provide financial strength to our clients through quality and conflict-free investments. It also involves a rigorous process from selecting loan applicants to helping them build their portfolios and effectively present their credentials to potential investors by guiding them through their financial and project plans. So the government’s effort to make doing business easier has certainly helped us to simplify the complex investment scenario.
Is there a need for more innovative financing options for pharmaceutical companies? And if so, why?
Yes, there has been a significant increase in the need for more innovative financing options for pharmaceutical companies. Longer-term loans will help pharmaceutical companies set up high-quality facilities (including for R&D) that meet global standards. The loans can also be used to help Indian pharmaceutical companies (including through overseas joint ventures) acquire overseas companies, tangible assets and brands. Attracting foreign investment is a major factor in mitigating these concerns, but also a long-term accelerator of growth. We see a lot of promise in India, especially with its innovative startups, the potential of India’s digital economy and its growing infrastructure.
What are the options? And the risks? For pharmaceutical companies as well as for investors? How to minimize these risks?
The main sources of funding are loans from commercial banks and / or microfinance institutions or external funding sources, such as angel investors, independent venture capital (IVC) and enterprise venture capital (CVC) . Another good option for raising capital is external debt through foreign investment. The need for financing creates a financial risk both for pharmaceutical companies and for investors or stakeholders invested in the company. Risk minimization can be done by analyzing the risks associated with long-term investments developing a solid quantitative view of the most important risks, organizing around lines of defense to strengthen oversight and minimize duplication, establishing risk appetite and prioritizing areas to focus on and leveraging big data and advanced analytics.