SIDBI Venture Capital Ltd, the venture capital arm of SIDBI (Small Industries Development Bank of India), is planning to make substantial investment in the pharma sector.

Next week, the company is planning to announce a new fund of size worth Rs 500 crore, a substantial chunk of which will be dedicated towards investments in pharma and biotech sectors, revealed senior officials in SIDBI Venture. So far the company has invested only in IT sector, and will be investing in pharma sector for the first time.

"SIDBI will be announcing a new fund of Rs 500 crore, which will be substantially invested in pharmaceutical and biotech sectors," said Ajay Kumar Kapoor, CEO, SIDBI Venture. The VC will be investing in companies showing excellent growth potentials, having good R&D infrastructure and talent, he added.

According to sources close to the development, SIDBI would be investing about Rs 200-300 crore out of the fund in pharma and biotech companies. The company is also eyeing heavily on MNC stocks, which is attractive among investors on account of the upcoming product patent regime.

Investment bankers and VCs, both Indian and foreign, are seriously eyeing at investing in Indian pharma companies. Foreign VCs like CVC International, New Bridge Capital and Temasek Holdings recently invested in companies like Matrix and Lupin. SIDBI, ICICI Venture, IL&FS, Canbank and Westbridge are major Indian investors.

"We feel India hold true potential for sectors like pharma, BPO, and auto. In pharmaceuticals, we will be investing in companies having potential to establish global presence," said S. Iswaran, managing director, Temasek Holdings Pvt Ltd, Singapore-based VC major. Recently Temasek Holdings acquired 14 per cent stake in Hyderabad-based Matrix Labs.