Grant Types

Tranche

In short

One portion or instalment of a larger funding amount that is disbursed in stages subject to the achievement of specific conditions or milestones. Government grants in India are commonly structured in 2–4 tranches over the programme period — for example, 25% upfront for equipment and materials, 50% against a mid-term progress report, and 25% on final project completion. Each tranche release typically requires submission of a utilisation certificate, expense statement, and technical progress report. The term comes from finance (French for 'slice') and applies equally to grant funding and debt financing.

How It Works

A tranche (from the French word for "slice") is an individual instalment of a larger funding amount that is disbursed in stages subject to the achievement of specific conditions or milestones. While tranche structures are most common in government grant programmes — where 2–4 tranches are released over the project lifecycle — the concept applies equally to venture capital (tranched equity rounds where part of the capital is held back pending milestones), debt financing (tranches of a loan released as construction or expansion phases are completed), and CSR commitments (tranches released against impact reports). Each tranche release typically requires the recipient to submit specific documentation: a technical progress report describing what was achieved, an expenditure statement showing how previous funds were used, and a utilisation certificate certified by a practising chartered accountant. Some programmes also require a site visit or verification by a technical committee before releasing the next tranche.

Application Process

The process for releasing a tranche typically follows these steps: 1. Complete the milestone activities defined in the grant agreement. 2. Prepare the required documentation — progress report, expenditure statement, and utilisation certificate. 3. Submit to the programme officer within the stipulated timeline. 4. The programme officer or technical committee reviews the submission and may request clarifications. 5. Upon approval, the disbursement is processed — typically taking 2–6 weeks from submission to fund receipt. 6. The next milestone period begins, and the cycle repeats.

Real-World Example

A startup awarded a ₹50 lakh BIRAC BIG grant has a four-tranche structure: Tranche 1 (₹15 lakh) — upfront for equipment and consumables, released at signing. Tranche 2 (₹15 lakh) — released upon completion of proof-of-concept experiments and submission of interim technical report. Tranche 3 (₹12 lakh) — released upon completion of prototype and field-testing. Tranche 4 (₹8 lakh) — released upon submission of final technical report, utilisation certificate, and audited statement. The startup completes each milestone on schedule and receives all four tranches within 14 months.

Key Takeaway

Tranche-based funding creates financial discipline and regular accountability. Plan your cash flow to bridge the gap between milestone completion and actual tranche receipt — the lag can be several weeks.

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Frequently asked questions

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Related Terms in Grant Types

Grant

A sum of money given to a startup or organisation that does not need to be repaid and does not require giving up equity. Grants are the most attractive form of funding for founders because they are non-dilutive (you keep full ownership) and non-repayable (unlike a loan). In India, grants are awarded by central and state governments, public-sector bodies, corporations through their CSR budgets, universities, international foundations, and multilateral agencies. They typically fund specific activities — R&D, prototyping, pilot projects, hiring, or go-to-market — and are disbursed either as a lump sum or in milestone-based tranches. The main trade-off is application complexity: government grants in particular require detailed proposals, supporting documents, and compliance reporting.

Non-Dilutive Funding

Any form of funding that does not require the founder to give up equity or ownership in the company. Grants, government subsidies, innovation vouchers, prize money from competitions and hackathons, and some types of debt (like revenue-based financing) are non-dilutive. For Indian founders at the early stage, non-dilutive funding is especially valuable because it builds traction and credibility without diluting the cap table before a priced round. The Startup India ecosystem has expanded non-dilutive options significantly through schemes like SISFS (seed fund), BIRAC BIG (biotech grants), and various state startup policies that offer grants-in-aid.

CSR Funding

Corporate Social Responsibility funds — a portion of profits that Indian companies above certain revenue and profitability thresholds are legally required to spend on social impact under Section 135 of the Companies Act, 2013. Many corporates run grant programmes that fund startups working in education, healthcare, sanitation, environmental sustainability, rural development, and skill building. CSR grants are typically faster and less bureaucratic than government grants, with decision timelines of 4–8 weeks, but they favour startups with clear social impact metrics. The Indian CSR market exceeds ₹25,000 crore annually, making it a substantial funding pool for impact-driven founders.

Milestone-Based Disbursement

A funding structure in which grant money is released in tranches as the startup achieves predefined milestones rather than as a single upfront payment. A typical government grant might disburse 30% at signing, 40% on completion of a prototype or pilot, and the final 30% on submission of a utilisation certificate and final report. This structure protects the grant provider from funding projects that stall, and it helps startups plan their spending in phases. It also means founders must carefully track deliverables, timelines, and reporting requirements — missing a milestone can delay or cancel the next tranche. Most DST, BIRAC, and MeitY grants use milestone-based disbursement.