With the Insurance Regulatory and Developmental Authority (IRDA) giving a green signal to the insurance companies to invest in technology funds, three insurance majors are in the process of clinching deals with APIDC Venture Capital Limited to be part of its Biotechnology Venture Fund (BVF). The Life Insurance Corporation of India (LIC) has already subscribed Rs 10 crore and three others are to follow suit to be part of the Rs 150 crore fund, expected to achieve final closure within nine months.

Informing this at the launch of BVF, Sharat Naru, managing director, APIDC VCL said that three insurance companies, two banks and one FI have almost closed the deal while more insurance companies have shown interest in the fund. He however declined to divulge more details about the companies involved.

Naru said that biotechnology is an ideal candidate for venture capital investment. “It is a relatively new industry, and a number of future drug discoveries, plant technologies, are expected to be born in small start-up companies. These companies will not only require venture capital funding, but require a lot of hand-holding tremendous heart on the parent of the VC investor”, he said.

The Fund will invest primarily in early-stage businesses that will experience huge growth as a result of the technology developments in biotechnology and life sciences related areas.

Speaking on the occasion N Rangachary, chairman IRDA, said that the approval to APIDC-VCL's Biotechnology Fund for investment by insurance companies was the first such instance in the history of the authority.

“This is a new asset class for the insurance companies and they are just beginning to form guidelines and policies to evaluate VC fund investments. Given this IRDA has been cautious, but positively guiding the industry towards the kind of trends seen in the developed markets, recognizing the importance of this asset class for large investment portfolios such as in insurance sector”, he said.

In the developed markets such as the USA, insurance companies have as large as 10 percent exposure to VC funds. Pension funds and insurance companies account for almost three fourths of all investment in venture capital funds. In India, insurance companies have invested less than 1 percent in venture funds, he explained.

Dr R A Mashalkar, director general, Council of Scientific and Industrial Research (CSIR) felt that with the introduction of BVF, a stage is set where the country can rightfully claim to be the research development platform of the world. He pointed out that India is clearly ahead of others in factors like highly skilled human capital, agri base, presence of well-established pharma industry, growth of biotechnopreneurs, government support and biodiversity. There are lot of expectations in biotechnology and the announcement of the fund is going to be of immense help for the sector, he said.