The Hindu Business Line : Tech acquisition fund on the anvil: Sibal

The Government is considering setting up a `Global Technology Acquisition Fund' (GTAF) to help Indian biotech companies' acquisition of mid-sized knowledge companies overseas, Mr Kapil Sibal, Union Science & Technology Minister, indicated here on Monday. "We are speeding up such acquisitions", he said referring to the phenomenon of Indian companies already aggressively acquiring businesses abroad.

The biotech sector, still a speck on the global scene, can grow beyond $ 40 billion by 2015 and the Government would do its due to spur it, Mr Sibal, who received the Biotechnology Leadership award, assured industry leaders.

The GTAF was first suggested over a year back by the CSIR Director-General, Dr R.A. Mashelkar, but in the context of the automobile industry.

"It is news to us, too. We have recommended (for the biotech policy) a seed fund, committing $ 200-300 million for 10-12 years. The terminology of this fund is different and so is its scale," Mr Nitin Deshmukh, Head, Private Equity, Kotak Mahindra Bank, said in response to a Business Line query.

The Minister has not mentioned any figure but industry watchers expect that the fund would cater to established players rather than start-ups. According to Mr Deshmukh, expanding biotech companies can lean on the 90-plus private equity funds waiting with their $ 2.5-billion ready money. In his view, the government may even be considering a special vehicle that could fund acquisitions through a mix of equity and debt. "Let's wait as it is early to comment on it," he told Business Line.

So far, Biocon Ltd is one company that acquired the IP assets of its R&D partner, Nobex Corp, in a nearly $ 5-million spend this year.

According to Dr K.K. Narayanan, President of the biotech industry association, ABLE, "At this point we are likely to see more of partnerships and joint ventures as most of the players today are small and may not have the resources for overseas acquisitions. Ideally, Indian companies should have a minimum IP position or at least a reasonable market presence before going in for any acqusition; only then can they be in a good negotiating position." He felt the industry should have a say in the management of fund, which should be used very prudently with mechanisms for due-diligence. In his view, Indian companies could look at many technologies with a social objective, such as vaccines and crop productivity. "The government could entirely fund such technologies and develop products for deployment through partner institutions in the public and private sector. Other forms of support could include grant, subsidy, soft loan or even equity funding."

Medical devices & innovations

According to Mr Kapil Sibal, also in the pipeline is a law similar to the 1980 US Bayh-Dole Act which would help scientists to get a third of the IP returns, along with the institution and the industry getting similar shares each. The grant under the Small Business Innovation Research Initiative (SBIRI) would be expanded to boost R&D.

While India is being sought after for cost arbitrage, the industry should aim at value arbitrage; as a first step towards a made-first-in-India initiative, the Government has finalised a policy framework to regulate medical devices; The Bill would address validation, standards of medical electronics, encourage joint ventures and local manufacturing of medical equipment that are mostly imported at present.

"Medical electronics will come to India automatically. What happened to the IT industry (in the last decade) will happen to biotechnology and medical electronics sectors so that people (Indian professionals in these sectors) can come back home," Mr Sibal said during a government-industry panel discussion.

Two symptoms of MNC interest in Indian biotechnology, he said, were the recent equity acquisition of Bio Merieux in vaccine company Shantha Biotechnics; and the Pasteur Institute shifting its vaccine manufacturing to India.

The DBT Secretary, Mr M.K.Bhan, said half a dozen institutes and translation centres would be opened in partnership with industry to create talent needed for the sector. Clinical trials would be supported and regulated.