Now SPREAD loans are being used for innovative products and processes only a few companies in the world have developed or, in some cases, are now developing. For example, Strand Genomics in Bangalore is using the loan to develop new methods of predicting the toxicity of drugs. Proalgen Biotech in Chennai is using the loan to manufacture natural beta-carotene in very large quantities. Electronica Mechatronic Systems in Pune is developing very precise magnetic tapes for measurement. And so on. These companies would definitely sell their products in the Indian market, but their technology would be contemporary enough for them to sell in the global market too.
It is not difficult to see the impact of these projects on the Indian industry, as early stage funding is still difficult for technology companies. Venture capitalists (VCs) usually come in at a slightly later stage. In any case, VCs do not fund R&D. The Technology Development Board (TDB) of the Department of Science and Technology (DST) finances commercialisation of R&D but not the R&D itself. So for an Indian product company, there is no place to go other than SPREAD. This programme, along with a few similar programmes, helped more than 100 companies catch up with the developed world in the 1990s.
...A SPREAD loan comes with conditions most would welcome. The payback starts only after commercialisation of the product. The loan is written off if the project fails. Sometimes, ICICI gets the repayments through royalties on the product. ICICI also insists on the company collaborating with an R&D institution. In the case of Strand, it was the Central Drug Research Institute in Lucknow that performed the lab experiments to validate Strand's models.
In the last decade and a half, more than a hundred companies and an equal number of institutions used the programme to develop new technology. Having tasted the value of R&D, several companies have gone for a second loan. The impact of SPREAD is now seen particularly in biotechnology, the most R&D-based industry in India now.
Arun Natarajan is the Founder of Venture Intelligence India, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of Venture Intelligence India newsletters and reports.