In early 2001, Tata Steel, Steel Authority of India (SAIL) and Kalyani Steel teamed up to sell steel online through their joint venture, mjunction. PricewaterhouseCoopers drew a business plan that envisaged Rs 20 crore of share capital and mjunction sustaining losses for four years before turning profitable.
Six months after, the dot-com bubble burst. Kalyani Steel withdrew from the venture. Tata Steel and SAIL halved their contribution to Rs 4 crore each. Viresh Oberoi, mjunction’s chief executive, says he was lucky to have Rs 8 crore paid-up capital while other ventures were shutting. He, however, had to be profitable from day one as there was no capital to burn.
Mjunction has returned over Rs 100 crore to its promoters in dividend, and it has never gone back to them for more capital. It continues to build new businesses.
“We needed to create value, if we were able to create value, we would get profit. So we did not offer any service free or at a discount,” says Oberoi, who counts hosting the recently concluded telecom spectrum auction as one of his company’s triumphs. The government earned over Rs 1 lakh crore from the auction, paying mjunction an undisclosed fee for its services.
Mjunction claims to be India’s largest e-commerce company, having transacted over Rs 2 lakh crore, excluding the spectrum auction. It runs the world’s largest e-marketplace for steel. And while other companies are gung ho about e-retailing, mjunction is finding niche areas in business-to-business commerce where it can build profitable ventures. It has a coal auction platform and is planning new ones to sell tea and charter ships.
“E-retailing brings you a lot of attention, but does not bring in the money. It is not to say that we will not get into retailing,” says Oberoi. The company launched its consumer ventures, straightline and autojunction, five years ago as inventory-led e-retailing. But with the onslaught of deep-pocketed rivals, it tweaked its business model. Today straightline offers loyalty programmes for customers and autojunction offers dealers a platform to sell spare parts. “We are building a strong foundation in B2B before we get into B2C, without spending humungous amounts,” he says. This is Alibaba’s model, in contrast to Amazon, he explains.