Still lost in transition

For a company that started as a five-person initiative from a university campus a decade ago, Bangalore-based Avestha Gengraine Technologies (Avesthagen), a biotechnology and bioinformatics company, has charted an aggressive inorganic growth strategy. Over the last three years, the company has bought its way into a diverse set of markets, including high-yield seeds and breakfast cereals and most recently dietary supplements with its $11-million deal for Renaissance Herbs. While the latest deal would boost Avesthagen's presence in the bio-nutritional market, it hasn't been shy of spending heavily to enter other high-growth segments as well.

The company has expanded its focus from agri-biotech to four distinct business units (biopharmaceuticals, biotherepeutics, food for medicine and agri-biotech). And with the help of half-a-dozen joint ventures with the likes of bioMérieux of France for the co-development of diagnostic chips for tuberculosis, Cipla, Nestle Nutrition and Limagrain, Avesthagen has ramped up its headcount to more than 500 across the country.

But critics of its founder Dr Villoo Morawala Patell, a PhD in plant molecular biology from University of Louis Pasteur, Strasbourg, France, contend that none of her new spin-offs has turned profitable. "Avesthagen started with a strong research focus in agri-biotech but seems to have run into an identity crisis recently and will struggle to convince the market that these deals are interconnected," says a Bangalore-based venture capitalist with investments in biotech and pharma. According to some estimates, Avesthagen has raised around $50 million in VC funding from the likes of ICICI Venture, New York Life Investment Management and old industrial houses such as the Tatas and the Godrejs, and has spent the money on buying companies and expanding R&D and manufacturing presence outside its HQ in Bangalore.

While Patell couldn't be reached for comment despite repeated attempts, she had earlier told the media that, "with growing global market demand, a robust pipeline of products backed by the best practices in R&D, Avesthagen is poised for significant growth."

Despite this bravado, Patell, who launched Avesthagen in 1998, has struggled to grow the business. Revenue for the recently concluded financial year was around $8 million (Rs 32.8 crore), but the firm has reportedly not broken even on any of her enterprises. To bring some order to the business, Patell has decided to treat each of her business units on a stand-alone basis and appoint CEOs for each of them to drive growth. Meanwhile, Patell is laying the foundation for a $100-million (Rs 410 crore) IPO, an idea which was first floated as far back as 2004, but is likely to happen sometime next year, to coincide with the commercial launch of its bio-nutritional and bio-pharmaceutical products. The timing of the IPO makes sense. But will investors bite?