OfBusiness targets focused growth

Raw material, finance and logistics remain age-old issues for small and medium enterprises (SMEs). OfBusiness, a Gurgaon-based start-up founded by Asish Mohapatra, former director of Matrix Partners, addresses these pain points. The company, incorporated in September 2015 as an aggregator for buyers and sellers, focuses on 12 of the 300-odd SME hubs in the country and has about 1,000 suppliers.

It has raised $5 million from Matrix Partners and other angel investors and another $12 million from Zodiac Technology Opportunities Fund and  Matrix Partners. OfBusiness is in talks with investors for more funds as it plans to launch a non-banking finance company (NBFC), to provide loans to SMEs.

The idea of a start-up struck Mohapatra in late 2014 and incorporated OfBusiness in September 2015. Seven others on board were Bhuvan Gupta, chief technology officer, who had a stint with Snapdeal; Ruchi Kalra, head of OfCredit, the NBFC, and a former partner with McKinsey; Chandranshu, head of products and former chief architect of DevFactory; Ranjan Kant, chief operating officer, had stints with Jabong, Snapdeal and BCG; Nitin Jain, head of construction, was earlier with RBS; Vasant Sridhar, was with ITC and Unilever; and Biswajit Mishra, head of sales, central India, had stints with Ernst & Young, TVS and Duet Hotels. 

From the beginning, the company has been focusing on infrastructure and engineering, with extra emphasis on the construction and fabrication materials segment. Operations in bulk materials and logistics are done through tie-ups with fleet owners. The aim is to make available better products at better prices and in time with comprehensive online and offline support, including an e-marketplace, logistics and credit platform.

While most SMEs buy through brick and mortar channels, online purchases are cheaper, says Mohapatra. He adds the raw materials market is  $130 billion. “Our advantage is materials are cheaper, delivery is assured and financial support available,” he says.

OfBusiness has a margin of three-five per cent on transactions. Mohapatra says the company had decided at the outset it would not spend much on marketing. Its expenses are one per cent of the revenue. It spends on technology to address various issues in the market, he adds.

The company has a presence in 10 cities, with a strong presence in six. 

OfBusiness

A major step is to set up an NBFC and OfBusiness has approached the Reserve Bank of India (RBI) for a licence. This will address the most important SME requirement, and the NBFC is expected to start operations in two months. The company says this will be an unique offering from a business-to-business (B2B) commerce platform. Other players in the segment merely generate leads for NBFC partners. 

OfBusiness will not look at any new sector or market for now and efforts are on to increase penetration in existing markets.  In five years, the company is looking at expanding to 200 SME hubs. The company can break even if it stops investing but has to spend on technology and other requirements. The challenge is to maintain quality service as it scales up. While there are competitors, such as Power2SME, the market is big enough for several, say experts.

Expert Take

Business-to-business (B2B) e-commerce is showing signs of rapid digital adoption, which translates into significant growth for MSMEs. We estimate the B2B market to reach 40 billion by December. It will be two times the B2C market by 2020. Therefore, OfBusiness is clearly in the right place at the right time. To be a winner in this space, you need to solve three key problems of procurement: Sourcing, logistics and credit. Most online B2B players are figuring out a solution through their platform. Hence, the litmus test for OfBusiness is solving these faster than its competitors.

OfBuisiness is tapping the market left unexplored by other B2B players. They are trying to garner systematic sourcing on their platform, unlike players like IndustryBying.com and Tolexo.com, which focus on spot sourcing. Metal Junction and MMRTC are the only two major players who focus on systematic sourcing, which is a much larger opportunity compared to spot sourcing. If they can build a strong foundation in B2B systematic sourcing and focus on the niche products in targeted geographies, they can grab a huge share of  B2B e-commerce. This, of course, is easier said than done. 

Chirag Dagli is director, e-commerce strategies of Ecumen, an Ahmedabad-based e-commerce consulting & technology provider