October 2010 | Sujata Agrawal

A busy junction

By adopting buy-and sell-side business models and spreading its services across several industry segments, mjunction services has grown into the unique position of being India’s largest e-commerce site

Less than eight years after it set off to change the way India transacts in the virtual marketplace, mjunction services (www.mjunction.in) has established itself as India’s largest e-commerce platform. In fact, it is today a company that presides over e-transactions worth over Rs650 billion, runs the world’s largest e-marketplace for steel, and has built a significant presence in areas such as coal, finance, procurement and automobiles.
 
mjunction is easily the busiest e-junction in the country today. But when mjunction set out to claim its place in the e-marketplace, it did not exactly have the kind of auspicious beginning that new ventures hope for. The year was 2001, and the dotcom bust had well and truly begun. Business models of the euphoric era of internet-based initiatives were beginning to be questioned. Dotcom businesses no longer generated the heady enthusiasm —or the valuations — that they had grown used to. Incidentally, the business plan drawn up by the consultants for mjunction bore an uncanny resemblance to the dotcom model.
 
As if that was not bad enough, one of the three partners that were to invest in mjunction backed out of the venture following the dotcom crash. So, the company was left holding a business plan with insufficient funding.
 
Says Viresh Oberoi, MD and founder CEO of mjunction, recalling those early days, “Tata Steel and SAIL had by then put in Rs40 million each. So we had Rs80 million in the bank and a business plan which called for Rs200 million; and we did not really see any more money coming in. That is when we decided we needed to do something different. So we threw away the business plan (which called for more advertisement and content, and less transactions), and said we will move to 100 per cent transactions and charge our customers from day one.”
 
An opportune start
Looking back, that wasn’t a bad call at all. The company, which started off as metaljunction, has since renamed itself as mjunction services to reflect its varied business interests; metaljunction is now the name of the business unit that provides e-selling services for steel, ferro alloys, minerals and metallics, and non-ferrous metals.
 
mjunction’s business volumes, in terms of transaction value, has grown from Rs0.9 billion in FY02 to Rs196.5 billion in FY10. By 2012, it aims to be “the most admired and acclaimed Indian brand in e-commerce, with an annual transactional value of Rs500 billion”.
 
The 50:50 joint venture between Tata Steel and the state-owned Steel Authority of India (SAIL) started out selling steel online for its two promoter companies. “We started selling some of Tata Steel’s long products, flat products and then got into secondary products. Once we got the breakthrough in Tata Steel, we were able to present the case study to various SAIL plants. We finally found a champion in Rourkela Steel Plant,” says Mr Oberoi. With these two customers already in the bag, it was just a matter of time before other public sector steel plants came on board. Soon, metaljunction started selling iron ore, manganese ore and pig iron, too.
 
A strong base
Even as the e-selling business grew, the company spotted an opportunity in the buying side of the business. It persuaded Tata Steel — then toying with the idea of setting up a new company to take on procurement — to allow it to handle the steel major’s buying function. After all, a common technology infrastructure would offer great cost efficiencies.
 
buyjunction was launched in 2001-02 with Tata Steel as its sole customer. “We have a model that remains unique even after eight years. We are the only company with a solution on the sell-side as well as on the buy-side. And this has given us tremendous advantage in terms of reducing our cost of operations, the benefit of which goes to our clients,” says Mr Oberoi.
 
buyjunction’s 30-odd clients are now spread across sectors, including FMCG, energy and cement. Besides catering to Tata companies Tata Power and Tata Chemicals, buyjunction is taking the lead in Project Prune, a programme aimed at aggregating the requirement of certain common products and services for the Tata group. It now has its sights set on bringing international clients on board.
 
Given that internet penetration was still limited and online purchasing still a new phenomenon in the early years of the last decade, mjunction invested heavily in people in its initial stages. Its team of ‘market makers’ or ‘customer contact persons’ — positioned in consumption markets such as Mandi Gobindgarh, Jalandhar, Ludhiana and Delhi — spent hours and days familiarising potential customers with the internet and the basics of online transactions. Slowly, but surely, they were enabling a behaviour and preference shift in customers. By the time mjunction was ready to foray into the coal business, the market was far more open to the ‘e’ way of buying and selling.
 
New business areas
In 2005, mjunction set up coaljunction to act as an intermediary between Coal India, its subsidiaries and end users — a space that had traditionally been occupied by middlemen and the coal mafia who bought coal from Coal India and its subsidiaries at very low rates and made huge profits by marking up prices in the market. A no-win situation for both Coal India and the end users. With coaljunction stepping into the picture, coal companies and buyers found a fair environment to engage with each other and the auction system allowed market forces to determine prices.
 
“Today 10 per cent of the coal that Coal India mines — about 45 million tonnes — is sold through the auction system where the realisation of prices is about 60-80 per cent higher than in the previous set-up,” says Mr Oberoi. With middlemen displaced from the whole process, both the coal companies as well as customers benefit from the transparency that coaljunction has enabled.
 
In the steel selling business, too, metaljunction helped reduce the clout of the middleman, who took advantage of the fact that small buyers could not pay cash up-front to the steel companies. The middleman would provide the cash to the company and then sell the steel to the small buyer — on credit and with significant mark-ups. In order to ease things for the small buyer, metaljunction tied up with leading banks such as Citibank, ICICI Bank, HDFC Bank and Standard Chartered Bank to provide finance to the small players.
 
The next business to roll out of mjunction was an online solution for selling vehicles. Initially targeted at the B2B customer, autojunction looked to fill the gap between sellers and buyers of repossessed vehicles (vehicles that banks and non-banking financial companies take back from owners who are unable to pay EMIs). The business was later expanded to the B2C space with the sale of both pre-owned as well as new vehicles.
 
Another B2C venture is the Amazon-inspired business unit straightline.in, which has created an online shopping world replete with consumer products such as electronics, gifts, consumer durables and so on. The idea was to de-risk mjunction’s business by increasing its customer base, instead of being dependent on a much smaller number of customers in the B2B space.
 
mjunction has also adopted the environmental cause with the introduction of the concept of green sourcing. Buyers on buyjunction can now make a difference to the world by reducing their carbon footprint: they simply have to opt for energy-efficient products when they go shopping.
 
mjunction’s repertoire also includes ventures such as valuejunction, which helps clients sell idle assets (as varied as conveyor belts, earth moving items, obsolete spares, plants, machinery, air strips and even aircrafts!); and mjunctionedge, which publishes magazines and reports related to its three primary segments: coal, steel and procurement.
 
So, will the list keep growing? “No, we won’t launch anything new. What we really need to do is to consolidate and ensure that these businesses become champions in their segments,” says Mr Oberoi. This is one junction that is bound to get busier.
 

mjunction: Presence across the ecommerce spectrum

metaljunction

  • Launched in 2002, it provides eSelling services for steel, ferro alloys, minerals and metallics, and non-ferrous metals.
  • Serves over 9,900 buyers across India; has sold nearly 8 million tonnes of steel for its clients so far.
  • Clients include SAIL, Tata Steel, Tata Metaliks, Tinplate Company of India and National Mineral Development Corporation, among others.

buyjunction

  • Launched in 2002, it offers innovative e-sourcing services.
  • Has procured goods and services worth over Rs105 billion till date.
  • Includes www.greensourcing.in which offers energy-efficient product substitutes and ideas on how to reduce carbon footprint and implement climate change projects.

coaljunction

  • Launched in 2005, it conducts coal e-auctions for Coal India and its subsidiaries; has sold over 75 million tonnes of coal for them.
  • Launched India’s first Coal Spot Price Index in September 2009.
  • Serves over 10,000 buyers across India.

valuejunction

  • Sells industrial assets, stressed assets (repossessed flats) and retail surplus.
  • Has conducted auctions of assets worth over Rs100 billion.

financejunction

  • Provides finance to supply-chains at competitive costs through innovative products and services such as:
    • Channel Finance: Online finance for distributors.
    • eBill Presentation and Payment Collection: Secure collection of money across the country.
    • Buyer Finance: Easy access to finance at competitive rates.
    • eCash Management System: To view payments due, print pay-in-slips and deposit cheques.
    • Insta-loan: An innovative downstream channel finance scheme in association with Tata Capital.

autojunction:

  • Launched in 2006, it offers B2B services for online sale of repossessed automobiles.
  • In October 2007 it forayed into online sale of new cars with the sale of the Reva electric car.
  • Conducted India’s first online auction of vintage cars in 2008.
  • In February 2010 it forayed into the automobile B2C space with its partnership with Electrotherm India to sell the electric twowheeler Yobykes.

straightline.in

  • Launched in October 2009, it is in the B2C retail space.
  • Has tie-ups with ICICI Bank, Citibank and Bill Desk to ensure complete e-payment solutions for buyers.
  • Drive India Enterprise Solutions provides last mile delivery of goods to customer’s premises.

mjunctionedge

  • Publishes three magazines: Coal Insights, Steel Insights and Sourcing Insights, available in digital versions. Coal Insights and Steel Insights are also published in Hindi.
  • Also publishes two high-end reports: India Coal Market Watch and Weekly Commodity Report besides holding world-class conferences.

ejunction

  • A trust formed by mjunction to provide free basic computer education to empower underprivileged people. Since 2007, 720 students have completed the basic course in computer education, including the use of the internet and English communication.
  • Training centres are running at Kolkata and Chennai. The plan is to train 1,000 students in FY11 and to take this initiative to cities like Bokaro, Rourkela and Jamshedpur, among others.

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