First Principles | Turn on, tune in… Something’s afoot in the hemp business
Some of India’s wealthiest are interested in start-ups on cannabis-based products. The market appears ready, and the ecosystem is prepped. It is a matter of time before the penny tips.
The family offices that manage the monies of some of India’s wealthiest are interested in start-ups on cannabis-based products. The Bombay Hemp Company (Boheco), co-founded by Delzaad Deolaliwala is a case in point. It raised $2 million in November last year from a clutch of high-net-worth individuals (HNIs). Earlier in 2017, it raised $1 million from Ratan Tata and Rajan Anandan, managing director of Sequoia Capital, who invested in their personal capacities.
Deolaliwala is chairman of the Pan India Medical Cannabis and Hemp Association as well. Those who have the appetite to invest in the business are people who understand what it takes to navigate India’s complex regulatory framework, he says. But most of them stay below the radar because of the stigma that is associated with cannabis in the public mind.
This has to do with the fact that cannabis contains chemicals called cannabinoids that give users a high. What many people are unaware of is that cannabis has medicinal properties as well. The more well-known ones are CBD (Cannabidiol) and THC (Delta-9-tetrahydrocannabinol). Marijuana is slang for cannabis, and hemp is a part of the plant with very little THC content. It is used to make textiles and has industrial uses as well.
It was the medical value of cannabis that got Nili Shah’s attention when her father contracted cancer. The trained psychiatrist knew the painkillers being administered would have severe side effects. But cannabis could offer relief and it was available in the US where she was based then. It culminated in her co-founding River Remedy with a friend. The company formulates hemp-based products that hold medicinal properties that deal with sleep disorders, chronic pain and anxiety. These steer away from regulatory scrutiny like other drugs.
The narrative around cannabis in the West is an old one. It surfaced some days ago when in conversation with a researcher who was curious to know if I had come across any Indian companies actively looking at psilocybin. This is a well-known hallucinogenic agent, is monitored by state and central agencies, and its possession can land a person in prison under certain sections defined by the Narcotics and Drugs Psychotropics Substances (NDPS) Act. Those who know of these Magic Mushrooms obtain them surreptitiously.
When asked about his interest in it, the researcher spoke of start-ups in the West investigating psilocybin which now has the interest of investors such as Peter Thiel and even Big Pharma companies such as Pfizer. “Clinical trials suggest many diseases can be dealt with by such substances and I believe it is a matter of time before the marketplace explodes,” he said. This narrative is at variance with all others which have it that magic mushrooms are integral to the underground culture world over.
When the integrity of his claim was cross-checked with Kuldeep Datay, a clinical psychologist affiliated with the Institute of Psychological Health (IPH) in Thane, he said, “It is an interesting field with a lot of solid research happening in Europe and some in the US.” However, he added, the stigma goes back to the times when American president Richard Nixon launched a War on Drugs programme and included marijuana in it. This pitted the very liberal left against the extreme right in the West. The baton was taken on by Ronald Regan and he convinced then Prime Minister Rajiv Gandhi to clamp down on it. And so, in 1985, India passed the draconian NDPS Act. In its original avatar, it carried a death penalty, that was watered down later by the Bombay High Court.
While the scientific community has moved on, policymaking circles remain conflicted. But perceptions the world over are changing. By early November, in Germany for instance, the recreational use of cannabis will be legalised. And the oversights are not very different from how alcohol consumption is regulated.
Deolailwala explains that in India while the finance ministry has no objections to how cannabis-based products are used state governments have the discretion to deal with them as they deem fit. And on their part, states wield the NDPS Act. “Dispelling myths and building credibility will be bolstered once larger industry players get in,” he says.
In any case, Shah and Deolaliwala are convinced a need exists, the market is ready, and the ecosystem is prepped. It is now a matter of time before the penny tips. And that is why, the high investor interest.