Mumbai: The Piramal group, promoted by Ajay Piramal, will launch a health care fund in early 2009, nearly 15 months after plans were first revealed.

“Though the size of the fund is yet to be finalized, we are almost ready with the design and infrastructure to launch the fund by early 2009," chairman Ajay Piramal said.

High hopes: Piramal Group chairman Ajay Piramal says investors are confident about the new fund as the pharma and health care sectors are relatively less affected by the global economic downturn. Abhijit Bhatlekar / Mint

Mint had reported in August 2007 that the Piramal group was expanding into the mainstream private equity (PE) business with the launch of a $200 million (Rs832 crore then) health care fund.

The fund, named India Venture Trust Fund, will focus on investments in hospitals, speciality clinics, health-care related business process outsourcing (BPO) units and medical equipment firms.

“...we would prefer to have a diverse investment portfolio within the space, instead of heavily focusing on health care service or hospital segment" given the downturn in the economy, Piramal said.

The pharma and health care sectors are still considered safe for investors as these are relatively untouched by the slowdown, but health care services such as hospitals are largely unorganized and not capable of gaining the confidence of large fund houses, said Alluri Sreenivas Rao, managing director, Morgan Stanley Pvt. Equity Ltd. Small investors or venture capital firms, however, would find it attractive to put in small equity investments, he added.

Commenting on the delay in launching the fund, another fund manager with a foreign asset management company said the Piramal group would have needed more time to build investor confidence in the current market scenario. He didn’t want to be identified as his firm also represents a competitor company.

Still, as it’s a growing area where India will require significant expansion, business prospects for such funds are impressive, said another fund manager with a foreign asset management firm. He declined being named as his firm also represents a rival company.

India Venture, headed by former State Bank of India chairman A.K. Purwar, is the Piramal Group’s second PE initiative. It is currently managing a $450 million venture capital, Indiareit Fund, which was launched in 2006.

The Piramal group is a maker of drugs and pharmaceuticals and has a presence in related areas such as diagnostics and pharmaceutical services.

As for its drug discovery business, Ajay Piramal said it would be tough to attract investors in the current fiscal environment as the business is seen as risky and because valuation is low.

Piramal Life Sciences Ltd, the group’s drug discovery company, had deferred its plan to raise funds from PE investors a few months ago. “We don’t expect an equity partner to come in soon, so the group will continue supporting the (drug) discovery projects of Piramal Life," the chairman said.

Pharma firms globally separate their drug discovery arms and invite outside investors to fund such high-risk discovery projects, but the downturn has slowed investment flow.

Early this year, PE firms Citigroup Venture Capital International and ICICI Venture pulled out their investments in Perlecan Pharma Pvt. Ltd, the drug discovery company formed after de-merging the drug discovery arm of Dr Reddy’s Laboratories Ltd.