Udyamik Commerce is offered Rs 20 crore of venture debt with warrants. How much runway does it really add, and what does it cost if the company later sells for Rs 2,000 crore?

The loan adds about 3.4 months of runway, not five, and at a Rs 2,000 crore exit it costs about Rs 11.7 crore, against about Rs 49 crore for the same money raised as equity. Interest totals Rs 5.7 crore and the warrants add Rs 6 crore, an all-in yield of about 24% a year. Debt is cheaper if the company does well and far more dangerous if it does not.

A family that takes a personal loan to cover a year of school fees has more cash today, but from next month it also has an instalment to pay. Venture debt extends runway by its size, less every rupee of interest and principal paid before the cash runs out. Here the timing is unkind: the interest-only year ends in month 12, the same month Udyamik's own cash would have run out, so the repayments arrive exactly when the company is thinnest.

Run it month by month. Without the loan, Rs 48 crore lasts 12 months. With it, cash starts at Rs 68 crore, but interest of about Rs 0.23 crore a month is added to the Rs 4 crore burn, and from month 13 a Rs 0.83 crore instalment joins it. The cash now runs out at month 15.4: a gain of 3.4 months, about a third less than the headline five.

Add up what the lender takes. Interest is Rs 5.7 crore across three years: Rs 2.8 crore in the interest-only year and less after, as the balance falls. The warrantsA right to buy shares later at a fixed price. Lenders take them so they share a little of the upside they are not otherwise paid for. give the lender 0.5% of Udyamik for Rs 4 crore; at a Rs 2,000 crore sale that stake is worth Rs 10 crore, a Rs 6 crore gain. All in, the lender earns about 24% a year, against a 14% coupon, and the warrants supply most of the difference.

Frame it as a bet on the next twelve months. Venture debt is cheap capital for a company that will raise its next round comfortably, and expensive capital for one that will not, because the repayments arrive when the company can least afford them and lenders usually hold covenants that let them call the loan. A strong answer says: take it only if the extra runway carries Udyamik to a milestone that raises equity on better terms, and negotiate a longer interest-only period, because that single term decides how much runway the loan really buys.