Out Of The Lab, Into The Market

In a few months, Concord Drugs, a Hyderabad-based drug company, will start making a unique bio-adhesive plaster for use in operations. When used for a cut it melts, holding the skin together. But as interesting as the product a first in India is the man behind it and the way he put up his project. M Srinivasulu is a retired police officer and has no experience in the pharma industry. How did he get his technology and who funded the project?

He and his partners bought it off the shelf from the Indian Institute of Chemical Technology in Hyderabad for a few lakhs. But to commercialise the technology, Concord will need a pilot plant.

 

This is usually where the difficulties begin for an entrepreneur. Few funding agencies finance a project before the product is marketed and reaches a certain critical mass. But Concord has got funding at this stage and at easy terms.

Srinivasulu and his partners raised Rs 50 lakh on their own, Rs 50 lakh from the venture capital fund of Small Industries Development Board of India (SIDBI) and Rs 50 lakh from Technology Information Forecasting and Assessment Council (TIFAC).

This is not a stray incident. It is part of a concerted effort by the government to fund technology development. TIFACs executive director, Dr Y S Rajan also the science and technology advisor to the Confederation of Indian Industry (CII) says, There are several research institutions in the country which get research funding at one end of the spectrum. At the other end, several financial institutions are willing to fund commercially-proven technologies. Venture capitals take the risk of funding the growth of a proven technology. But the problem is getting research out of the laboratory and into the commercial world. This is where the government is stepping in with finance.

TIFAC, Technology Development Board (TDB) and the Programme Aimed at Technological Self-Reliance (PATSER) are among the agencies set up to promote the technology-driven dreams of entrepreneurs.

TIFAC funds only home-grown technologies. The technology could have been developed by an individual, by an R&D department or in a research institution. The company seeking funding could be a new, or an established, one. But the essential condition is that the technology should be indigenous and be commercialised for the first time.

The terms of financing are liberal. The agency funds 50 per cent of the project cost, usually up to Rs 1 crore. For the first three years, the borrower will not have to repay anything. But over the next five years he will have to return one-and-a-half times the amount borrowed.

This is not easy money, cautions Sajjid Mubashir, the officer in charge of TIFACs scheme. The technology has to excite us and we have to be convinced that the promoter can market the product. We are very thorough and have several experts at our call. We do not fund land and building or marketing costs a promoter cant zip around appointing dealers and staying in five-star hotels at our expense, he says.

So how does a promoter fund land and building? SIDBI has opened a venture capital fund to aid small businesses that is one avenue. However, TIFAC is not rigid. We have funded Concords marketing costs because it involves expensive doctors trials, says Mubashir. TIFAC also tries to process papers in three months.

At the end of the project, TIFAC is the co-owner of the technology but claims that it will not give this technology to other companies. This is more a safety measure to ensure that commercial production actually takes place.

TIFAC is also looking for research institutions and industrial partners to fund. Prof Gulrajani, dean of industrial research at IIT Delhi, has opened an office to help TIFAC do so. One such venture is a product developed at the laboratories of the Centre for Polymer Engineering at the institute.

The product is a unique synthesis of an electrically conducting polymer called polyaniline. It will be produced by a Noida-based company called Injotherm. This polymer has several applications: A plane painted with this material will not reflect, making it invisible on a radar screen. It can also be used as packaging material for transporting components which need to be shielded from electric and magnetic fields. And if mixed with PVC, it can be used to produce conducting floors.

One of the partners at Injotherm is Pradeep Singh who has an MTech in polymer engineering from the Harcourt Butler Technology Institute (HBTI) in Kanpur. He worked at Premier Vinyl Flooring and with the Lohia group before starting off on his own. This new product has several applications, and was developed by the renowned scientist, Prof LK Verma of IIT Delhi. I had got to know her because of a project I had worked with her on, says Singh. The pilot plant will cost Rs 86 lakh; he had approached TIFAC for Rs 45 lakh but will get Rs 28.6 lakh.

The newly-formed Technology Development Board (TDB) funds larger, commercial-scale projects unlike TIFAC, which funds research and pilot plants. Shanta Biotech, a Hyderabad-based company to which TDB gave Rs 3 crore to put up facilities to produce the Hepatitis-B vaccine, has just started commercial production.

TDB also claims that it is promoter-friendly. We dont ask anyone to mortgage their property with us, says joint advisor, Dr Pawan Sikka. If a project fails, we write off the entire loan. Like TIFAC, TDB loans 50 per cent of the funds required and does not fund land and building. We fund depreciating assets, says Sikka. Land only appreciates, and hence the promoter is not taking any risk in funding that himself.

The interest rates are not very high either. The promoter is given three years to develop the product and one year for marketing. TDB charges six per cent simple interest on the remaining principal amount from the day the cheque was handed out. After the fourth year, the promoter has to pay back in five equal instalments over the next five years with interest. The board funds research institutions and their industrial partners, entrepreneurs with access to technology or a company with research capabilities. Unlike TIFAC, TDB also funds commercialisation of imported technologies. It will soon come out with new guidelines which will enable it to fund software companies as well.

PATSER, yet another funding agency, gives grants but expects a royalty payment. The agency funds more at a research level and up to the point that the product is demonstrated. It also plans to fund the importing of technology at lab scale to demonstrate its commercial viability here.

One PATSER-funded project may soon become commercially viable. The Bangalore-based Rs 1 crore Turo Tech Engineering is developing a prototype for a 1/2 mega watt, bio-methane turbine which is multi-fuel and works on distillery waste. If the turbine is successful, it is expected to be adopted by many process industries to use waste and replace diesel generator sets.

The company is promoted by Krishna Kumar, a graduate in mechanical engineering from Cornell University and an ex-employee of Garrett Aviation. The prototype for his turbine is being developed with National Aerospace Laboratory (NAL), Bangalore. 40 per cent of the Rs 3 crore project is being funded by PATSER. Funds have also been tied up from IDBIs venture capital fund.

Rajendra Ghogale and Mathunni Mohan quit Amul in 1991 to start Cheese Makers India. The duo has also recently applied to PATSER for funding. The Rs 1.5 crore, Pune-based company, of which SIDBI is a 30 per cent owner, supplies paneer and mozzarella to the Taj group, Pizza Hut and Dominoes and is also in the export market.

The company wants to move to higher-end cheese and also improve profitability. It wants to use ultra-high membrane technology, to reduce waste and convert more fat into protein. It had approached National Chemical Laboratories (NCL) in Pune for the project. The pilot scale plant will cost Rs 42 lakh.