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November 10, 2008

ET interview with ChrysCapital's Sanjiv Kaul

Economic Times has an interview with ChrysCapital MD Sanjiv Kaul, who is also an expert on the pharmaceuticals sector.
Valuations across most sectors now look attractive for a prospective PE investor. But entrepreneurs still need to reconcile to the changed paradigm of a downsized market capitalisation. With debt instruments being scarce and costly, IPOs not being the current flavour of the capital market, and the FCCB experience not positive in today’s environment, entrepreneurs have now realised the need and importance of raising smart capital and PE is all about providing smart and dependable capital. I am quite optimistic that we will see a significant jump in the number of deals transacted in 2009.

...Sectors like pharma and healthcare were not the beneficiaries of the past-market exuberance. In fact, there was a significant market cap correction in the pharma index with P/E multiples dropping from 26 in 2004 to 17 in 2007. Investments will take place in these sectors not because these are safe and defensive but primarily due to strong industry fundamentals and vibrant domestic and export opportunities.

...Most of them have done it to clean up their balance sheet and in the process get a better valuation for the parent company as well as attract primary investments in the demerged research entity. They have realised pharma research is a costly, a risky proposition and a long haul. While Indian pharma has the basic chemistry and pharmaceutics skill-set, it still needs to invest in innovative technology and more importantly cultivate a different mindset to what made them good while making generics. We still have a long way to go but doing innovative research is the only long-term sustainable value creator for Indian pharma.
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports. Email the author at arun@ventureintelligence.in