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On a lively Mumbai night in early 2015, Ashish Mohapatra and his buddy Bhuwan Gupta were engrossed in high-energy conversation. It will set the stage for something special. Amid lively banter, Mr. Mohapatra shared his dream of starting a B2B venture and made an interesting invitation to Mr. Gupta. Without a moment’s hesitation, Mr. Gupta, who was about to become chief technology officer at the then-flourishing Snapdeal, casually shrugged and said, “Of course.” Little did they know that that spontaneous interaction would unexpectedly chart the course of their future.
“I don’t know if he agreed because he was tipsy. I don’t even know if he had heard of B2B,” said Mohapatra, who won the BT-PwC India CEO of the Year award in the unicorn category. Think of it this way. But behind the laughter, there was a deeper bond of trust between Mohapatra and Gupta. Mohapatra emphasizes that if Mr. Gupta had offered him an invitation, he would have accepted immediately. Thus, strengthened by this tacit pact, Mohapatra assembled a dream team consisting of Ruchi Kalra (Mohapatra’s wife), Vasant Sridhar, Gupta and Nitin Jain. United by trust, they embarked on a joint mission to pave his B2B path for small and medium-sized enterprises (SMEs).
This decision involved significant personal risk as Mr. Mohapatra and Mr. Kalra left their respective positions as investors at Matrix Partners and Mr. Kalra as a partner at McKinsey & Company. They moved from Mumbai to Delhi with their newborn baby to set up their business.
Why B2B? Mohapatra’s thesis was simple. In his work as a non-tech venture capital firm focused on healthcare, consumer goods, and manufacturing, he saw his B2B pitches increase from the end of 2014 to his 2015. I made it. He was familiar with most of the solutions being built, and he felt that many of them were. He doesn’t understand the field well. He also saw many qualified people enter the field, people with good family backgrounds and work histories. Above all, this was an important and necessary career expansion for him, as he was encouraged to consider investing in technology to grow his career, and he took it upon himself to do so, knowing that it would come with a learning curve. I decided to take on the challenge.
Right from the start, the team established five principles as the foundation of the company. They aim to “support underserved small and medium-sized businesses, going beyond mere financing to ensure sensitive recovery, foster growth through debt, and maintain profitability.” I was there. And they stuck with it.
OfBusiness has made three promises to small businesses. First, by cutting out the middleman and sourcing raw materials directly from the source, they promised to always offer their manufactured products at better prices than any other option. This has ensured a price advantage. Next, we built trust by guaranteeing on-time delivery. Thirdly, we assured SMEs that all quality tests and QC reports will be provided at the time of delivery to ensure the quality of the products.
Based on these founding principles, OfBusiness started with steel as its first category. They recognize the broken and opaque nature of the steel supply chain and face challenges such as logistics, last-mile delivery, and pricing complexity. The company later diversified into aluminum, copper, and zinc. Because entrepreneurs have determined that these areas face similar challenges. Eventually, OfBusiness moved into polymers, petrochemicals and chemicals.
The business quickly gained momentum and became profitable from its launch in February 2016. Within just two months, he reached a monthly turnover of Rs 10 billion by April. By the 36-month mark, OfBusiness’ monthly income was consistently touching his Rs 100 million mark.
Currently, steel accounts for 35% of the business, followed by the non-ferrous categories of aluminum, copper and zinc at 16-17%, petrochemicals at 10%, agriculture at 15%, chemicals at 7-8% and polymers at 7%. ing. -8%, the rest he consists of 2-3 small segments.
To make operations seamless, the company has also developed a range of in-house technology products, including BidAssist for tender procurement and SMEAssist to digitize small and medium-sized business operations. Ved AI, a pricing engine; OxyV for bill discounts. Oasys for Commerce ERP (Enterprise Resource Planning). Trace costs for construction project monitoring. Other tools for lead management and loan processing.
However, building a robust supply chain also presents its own challenges.
“In our early days, I remember sitting outside the Steel Authority of India office for nearly four months until they actually agreed to give us a chance. But it was similar. We were forced out of several companies, one of which was Sangam TMT, which we ended up acquiring later,” says Mohapatra. .
As the business gained momentum, it started working with banks and non-banking financial companies (NBFCs) to offer credit through a marketplace model. However, the team soon realized that banks and NBFCs were hesitant and slow due to the company’s relatively small size and lack of confidence in the company’s underwriting capabilities. “By the time they gave us a line of credit, we would have lost the purchase order. So we decided to do it ourselves, and that’s how Oxyzo was born. ” he says.
The company’s lending arm, Oxyzo, was established in June 2018, and OfBusiness suspended third-party financing. Led by Kalra, his Oxyzo is particularly suited to small and medium-sized businesses seeking purchase financing. In May 2022, Oxyzo became a unicorn with its first external funding round. OfBusiness owns nearly 75% of his Oxyzo shares.
OfBusiness first raised $4.3 million from Mohapatra’s former employer Matrix Partners, and later attracted interest from major global private investors including SoftBank, Tiger Global and Alpha Wave Global. The company was valued at $5 billion in its last round in 2021.
Currently, the raw material sourcing aggregation business accounts for 72% of revenue, of which 16% comes from processing and 12% from manufacturing.
As for the reason behind OfBusiness’s profitability, Mohapatra says it was because they knew how to cut expenses. “We broke even in 2018. The first time we posted a full-year operating profit was in 2019. We are very frugal, we don’t have a lot of operating expenses, and we never trade at a loss. , we sold without marketing and we didn’t sell at a discount,” he explains.
Mohapatra emphasizes that while the market opportunity is vast, the main focus should be to ensure that growth does not compromise quality and profitability, a temptation many startups fall into.
“Even at our current scale, we can easily grow at a CAGR of 40-50% over the next five years. Currently, our annual revenue is close to Rs 20,000 crore. At our scale, we can generate more profits. The challenge is to continue, profitability growth has to be faster than revenue growth, we can’t make bad capital allocation decisions and we have to make sure the business is very clean and focused. That creates risk,” he says.
So it’s no wonder industry watchers are happy. Sarthak Misra, investment director at SoftBank Investment Advisors, praises Mohapatra’s disciplined cost management, which he says is deeply rooted in his early understanding of the thin margin nature of B2B. According to Misra, this will not only help the company continue its pursuit of profitability, but also help it scale.
“Mohapatra understood from day one that B2B marketplaces are thin-margin businesses. The founders needed to make money on every transaction and collections should be everyone’s priority. From day one, we set an example of being a great company. The Mohapatra Head collection is still there today. Everyone, from the youngest employee in the company to the founder, has been focused on this from day one, and we have been able to do so while still making a profit. We were able to scale up,” says Misra.
As for the future, Mohapatra believes there is a huge market opportunity for what they are doing and plans to stick to their current category for at least the next three to four years. Additionally, the company is now gearing up for its public market debut after eight years in business, expected within the next 15 to 18 months.
For Mohapatra, steering the ship as a category leader is not just a role, it is also a responsibility. He is committed to tackling challenges and working tirelessly to ensure that our ventures create value for everyone in the ecosystem, from suppliers and small businesses to investors.
@binu_t_paul
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