India's first medical SEZ awaits liquidation

Chennai: The country’s first medical Special Economic Zone and first Basic Medical Science Park capable of putting India on the global map of medical research and biotechnology will soon die even before becoming fully operational, thanks to the apathy of the banking system and their inability to understand the requirements of gestational scientific research projects.

The project envisaged by Padma Sri Dr. K. M. Cherian, the veteran cardio-thoracic surgeon credited with the country’s first bypass surgery, is staring at impending liquidation.

Most activities, including breakthrough researches, have come to a halt as the banks declined to accept the one-time settlement offered by Tamil Nadu government to salvage the project. Without considering a proposal to lease labs and plots to biotech companies for revenue generation, banks have gone ahead with the insolvency process.

The Frontier Mediville project spread across 356 acres, 45 km off Chennai, was initially planned to be a Rs 1,000-crore project that will have a Basic Medical Science Park for research activities, a Bio-Hospital, a Sterile Bio-medical Corridor for producing medical consumables, disposables and pharmaceutical products and a 1,000-bed Medical University and Research and Training Centre among other related facilities.

Out of this, a 41-acre area was granted the Special Economic Zone status to conduct research in basic and applied sciences, tissue based products, pre-clinical animal studies and clinical studies apart from medical and biotechnology courses in 2010.

The same year, State Bank of India and Bank of Baroda sanctioned a total term loan of Rs 90 crore, of which Mediville drew Rs 38 crore from SBI and Rs 40.47 crore from BoB. Rajasthan Venture Capital Fund (RVCF) had invested Rs 15 crore and picked up 11 per cent stake in the company. The Technology Development Board has a 16.56 per cent stake and the Tamil Nadu Industrial Development Corporation too has a small share. In total, Rs 227 crore has been invested in the project.

In 2013, the project was declared a non-performing asset. The company claims it has paid back over Rs 20 crore.

While the banks went ahead with the insolvency plan and fixed the liquidation value at Rs 134 crore, Tamil Nadu government offered to revive the project by providing a one-time settlement of Rs 70 crore to the banks, converting Mediville into a Medical City and putting up a community hospital on the premises.

However, banks did not accept the offer. The bank officials did not respond when Financial Chronicle contacted them.

The company tried to raise money by leasing out plots and labs for biotechnology and pharmaceutical companies. “We had developed 25 acres as Bio Enterprise Zone, which could be leased out to biotech, pharma and medical devices companies. We could have generated revenue of Rs 56.75 crore on leasing the plots and Rs 7.4 crore by leasing bio-labs. We had received concrete proposals from a few companies as well. However, the banks did not issue NoC for this proposal,” rued Dr. Cherian.

Kiran Mazumdar-Shaw, CMD of Biocon, feels that gestational projects should seek venture funding and not debt funding by banks. “Debt financing does not understand what venture funding is all about. All these kinds of gestational businesses take seven to eight years before they show any signs of commercialisation. Venture funding in life science is not adequate in India because the risk-reward is gestational. It is unfortunate that we are losing opportunities to create value through research-led businesses,” said Shaw.

Mediville has been undertaking several path-breaking researches, the fate of which is in a limbo. It had collaborated with Georgia Tech, Atlanta, University of Minnesota and Central Leather Technology Research Institute to develop indigenous bio-prosthetic heart valve using shark’s skin.

The project to produce BiQ Heart – pumpless self powered cardiac assist low cost device- with the collaboration of QHeart, Australia, has been stalled for want of funds.

Similar is the case of artificial mechanical heart project with Russia’s Sputnik and its miniaturization project with Titan. The Sputnik heart would cost a fourth of the artificial heart made in the US.

Amplification of red blood cells and creation of artificial platelets using nano-technology are among the several path-breaking researches done at the project.

“I need around Rs 200 crore to salvage the project. But adequate funding sources for long-gestation researches are not available in India…the approval processes are time-consuming. No wonder, we are ranked below Kenya in terms of scientific research,” said Dr Cherian. He fears that his dream project will get converted into a real estate project after the insolvency process.