India Economy

At the right ‘junction’ of online action

LOKESHWARRI S K MAULIK MADHU | Updated on January 18, 2018

VIRESH OBEROI, CEO & MD, mjunction

mjunction is a pioneer in holding auctions for steel and coal through its online platform

While much has been written about e-commerce in the B2C segment, there is immense potential in the B2B segment as well; as demonstrated by mjunction. The company runs the world’s largest e-marketplace for steel, having sold over 12 million tonnes till date. It has also pioneered the online sale of coal in India and over 500 million tonnes of coal has been sold through it. mjunction offers a range of services through its platforms such as metaljunction, buyjunction, coaljunction and valuejunction. Viresh Oberoi, CEO & MD of mjunction, explains the business model of this e-commerce major and outlines the opportunities in this space.

Could you explain the business model of mjunction?

We largely follow a market-place model though we are experimenting with an inventory-based model as well. That said, we run both verticals and horizontals. Verticals address specific industries such as steel and coal while the horizontals cater to many industries but deal with a specific need such as procurement. We have a business area called buyjunction that facilitates end-to-end, non-core, procurement for clients across business verticals. We also have a business unit called straightline, which is an online e-commerce web store that runs loyalty programs and does analytics that, again, cuts across industries such as steel, FMCG and even construction. We also have some value-added services such as financejunction, which enables banks to provide finance to small players so that they can participate in our market place.

We also develop applications for customers such as BHEL, SAIL, Ordnance Factories Board, Garden Reach Ship Builders and, more recently, Chhattisgarh government, who do not wish to participate in our market place. We maintain and host these applications, which are run by them exclusively.

How does a typical transaction take place on mjunction?

Let’s take the example of metaljunction, we approach the manufacturer or the seller, such as Tata Steel and tell them that we will sell certain categories of steel for them. There are such categories manufactured by steel companies that account for almost 10 per cent of their production.

We take on the responsibility of selling these product categories in an exclusive manner (these categories are not sold through any other channel by the company). We then reach out to our buyer base, let them know about the availability of the material along with a product description and hold an auction. We take care of all the documentation on behalf of the seller.

In steel, can you tell us who are the buyers and sellers on the mjunction platform?

Today, almost all the major manufacturers of steel are selling through our platform. We started with Tata Steel, now we have SAIL, Jindal Stainless, Jindal Steel and Power, RINL, Uttam Galva, etc. All of them sell certain categories of steel on our platform.

On the other side, we have over 14,000 buyers who are fabricators, re-rollers, traders, who participate in this auction conducted by us.

What categories of steel are sold on this platform?

These are commoditised steel, semi-finished material, billets, slabs, secondary steel, defectives, by-products of steel, iron ore fine, etc. Both price discovery and buyer discovery take place for these materials on our platform. These are transactional sales as opposed to relationship sales.

For buyers such as auto or white-goods makers, steel producers will make products specifically required by them. They will, therefore, not come to our platform. The buyers on our platform are large in number but smaller in size, so steel companies find it far more efficient to sell to them through our platform.

The minimum transaction value varies from lot to lot. Some could be ₹2 lakh and others could be ₹2 crore. The quantity can vary from 50 to 25,000 tonnes depending on the material sold. Annually around 1 million tonnes of steel and 1 million tonnes of other items such as iron ore fines and other by-products are traded on metaljunction.

Could you tell us a little about coal junction’s clients?

The participants in the coal auctions are largely cement companies, sponge iron companies, brick kiln operators, electricity generating companies, traders and so on. Some of these are large buyers.

We introduced coal e-auction to Coal India. We have developed a platform where other coal companies as well as Coal India can sell their products. The activity of selling the coal is conducted by us and not Coal India. We originally started this to sell coal for Bharat Coking Coal’s.

What are your revenue streams and what are your margins?

We look at the value of transaction, which is similar to the gross merchandise value of B2C e-commerce companies. The value of transactions last year was about ₹64,000 crore. We take a small percentage of that as our fee - paid by either the buyer or the seller - which is our revenue. Last year, we grew our revenue, year on year, by 33 percent; we were able to increase our profit after tax by 44 per cent. We have been profitable from 2001, the first year of our operation and we have been able to drive growth mainly through internal accruals. Our gross margins are about 40 per cent. The fee is largely linked to the value of transactions, but the fee structure is still evolving. We have no private equity investors; the company is owned by Tata Steel and SAIL; both hold equal share. Our paid-up capital is ₹8 crore; this has not changed since 2001; we are a dividend paying company.

What was the value of assets sold on valuejunction and what is the role you play here?

Valuejunction sells everything except coal and metal. A vast array of things are sold here from diamonds to flats, power plants, fertiliser plants, glass furniture, non-performing assets, idle assets — anything and everything. There was a customer who wanted to sell his airport; he had a runway he wasn’t using and he wanted to monetise that. We sold that for him. Another customer wanted to sell a helicopter; we found a buyer from Houston, Texas. Valuejunction also conducts spectrum auction for DoT. We have a two-step approach. One is to inspect the asset and give a report on its saleability, value, etc. Two, is to try and sell it.

Published on July 31, 2016

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