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Serum Institute of India was on the verge of signing a billion-dollar agreement with a clutch of marquee global investors last year but withdrew at the last minute even as it struggled to scale up production of covid-19 vaccines due to an apparent lack of funds, said two people directly aware of the matter.

The family-owned firm turned down the offer by a consortium of private equity firm TPG Capital, Abu Dhabi’s ADQ and Saudi Arabia’s Public Investment Fund ( PIF) following differences over valuation, few days ahead of the deadline sometime in October last year.

According to the persons cited above, the decision to not raise funds was also aided by an inflow of funds into the company from Bill and Melinda Gates Foundation, which provided the vaccine maker $300 million to fund vaccine doses for low- and middle-income countries.

“The Poonawalla family was seeking a valuation of $10 billion for a newly created subsidiary under which the commercial interests of all of SII’s upcoming vaccines, including the covid vaccines was to be housed. SII has partnered with five international pharmaceutical firms, including AstraZeneca and Novavax, to develop a Covid vaccine and committed to producing one billion doses, of which it has pledged half to India.However, the Poonawallas changed their mind and refused the equity infusion," said one of the two people cited above.

Vaccination race
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Vaccination race

“The primary reason was clearly valuation as the family expected an even higher valuation given the margins it was expected to generate from vaccine sales," this person added.

“It appears that the family developed last-minute jitters about divesting stake," said the second person, adding that “this is, however, not the first time the family has engaged with investors but eventually decided against divesting equity. “In 2015, SII held several rounds of talks but decided to not sell a stake."

“In hindsight, no one anticipated the severity of the second wave of covid infections being witnessed now, and it appears that SIIs promoters too missed the urgency," said the second person.

However, in April, Adar Poonawalla said SII needs 3,000 crore ($408 million) from the government to boost its “very stretched" production capacity. Requests for comment sent to Adar Poonawalla, TPG Capital and ADQ remained unanswered until press time on Tuesday. A PIF spokesperson declined to comment.

In a recent interview with Financial Times, Poonawalla, currently in London, warned shortages of vaccines will continue through July when production is expected to increase from 60-70 million doses a month to 100 million. Poonawalla said authorities did not expect to confront a second wave in January when new coronavirus cases had declined.

“Everybody really felt that India had started to turn the tide on the pandemic," he said.

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