OfBusiness: The Unseen Giant of B2B

Introduction

In the competitive landscape of Indian business, companies like Zera, Zato, and Lenskart often dominate the headlines. Yet, quietly operating under the radar is a B2B giant, OfBusiness, with revenues that dwarf these household names. With an annual revenue of approx. ₹15,432 crores for FY23 and a PAT (Profit After Tax) of over ₹463 crores, OfBusiness is a formidable player in the MSME (Micro, Small, and Medium Enterprises) sector. This case study explores the journey of OfBusiness, from its inception to becoming a leader in the B2B industry, and uncovers the strategic insights that propelled its success.

Inception: The Vision Behind OfBusiness

The story of OfBusiness begins in 2015, when Ashish Mohapatra, a former VC at Matrix Partners India, decided to embark on a new journey. Despite his successful career trajectory, which included stints at McKinsey & Company and ISB, Ashish was drawn to the untapped potential of India's MSME sector.

Why MSME?

MSMEs, with revenues under ₹250 crores, are the backbone of the Indian economy, contributing nearly 30% to the country's GDP and providing employment to a significant portion of the population. However, this sector faced numerous challenges, including fragmented supply chains, lack of access to quality raw materials, and the burden of operating on credit cycles.

Recognizing these challenges, Ashish assembled a team of four co-founders to tackle the complex MSME B2B market. Their mission was clear: to simplify the supply chain, ensure timely deliveries, and provide MSMEs with access to financing, all while maintaining a focus on profitability.

Strategic Insight 1: Decoding the B2B Value Chain

Understanding Customer Patterns and the Value Chain

The B2B sector, especially for MSMEs, is complex, with multiple layers of distribution and a heavy reliance on credit cycles. OfBusiness's first strategic insight was a deep understanding of the B2B value chain, particularly in the raw materials sector.

Why Raw Materials?

Raw materials, though having lower margins compared to finished goods, offer higher frequency of capital turnover, making them a sustainable business choice. The fragmented nature of the raw materials supply chain, where no clear demarcation exists between distributors and territories, presented an opportunity for OfBusiness. By focusing on raw materials, OfBusiness could navigate the market more effectively and establish itself as a key player.

Simplifying the Supply Chain

To understand the value chain, let's consider the example of steel sheets, a popular raw material. The supply chain begins with a large manufacturer like JSW Steel, which produces steel sheets in bulk. These sheets then pass through various layers of distributors, traders, and possibly sub-distributors before reaching the MSME, which might be a small fridge manufacturer in Delhi.

This complex chain often results in higher costs and inefficiencies. OfBusiness aimed to streamline this process by acting as a direct link between manufacturers and MSMEs, cutting out intermediaries, and providing better visibility and control over the supply chain.

Strategic Insight 2: Cracking Low NPAs

Understanding NPAs in the B2B Lending Space

One of the biggest challenges in the B2B space, particularly when providing financing, is managing NPAs (Non-Performing Assets). The industry average for NPAs hovers around 4-5%, but OfBusiness has managed to keep its NPA rate below 1%.

The Secret?

OfBusiness achieved this through meticulous underwriting and efficient collections processes. They only lend to companies with a minimum revenue of ₹20 crores and a strong credit history. Furthermore, Ashish Mohapatra himself heads the collections team, ensuring that the discipline and rigor he brings to the process are maintained.

Repeat Customers as a Safeguard

A significant factor in maintaining low NPAs is the repeat nature of OfBusiness's customers. MSMEs, once they start sourcing from OfBusiness, rarely switch suppliers due to the reliability and quality of service. This repeat business ensures that customers are more likely to pay on time, safeguarding OfBusiness's financial health.

Strategic Insight 3: Becoming the Amazon of B2B

Expanding into Manufacturing and Processing

After mastering the aggregation and financing aspects of the business, OfBusiness moved into manufacturing and processing, much like Amazon's strategy with Amazon Basics.

Why Manufacturing?

Manufacturing offers higher margins and greater control over the supply chain. With its extensive data on demand trends and pricing, OfBusiness could identify gaps in the market and enter high-demand categories. By acquiring companies in sectors like steel, aluminum, and textiles, OfBusiness added another revenue stream, further solidifying its position in the B2B market.

Strategic Insight 4: Zero Customer Acquisition Cost

Innovative Customer Acquisition through BidAssist

In a move that showcased OfBusiness's focus on profitability, the company developed a unique customer acquisition tool called BidAssist. This platform helps MSMEs navigate government tenders, a lucrative market with thousands of opportunities daily.

How It Works

BidAssist uses AI to analyze tenders and match them with the right MSMEs, providing them with insights into their chances of winning the contract. Since the tool is free, it naturally attracted a large number of MSMEs, many of whom later became customers of OfBusiness. This strategy resulted in a virtually zero customer acquisition cost and created a self-sustaining loop of new business.

Conclusion

OfBusiness's journey from inception to becoming a ₹41,000 crore empire is a testament to the power of strategic insights and deep market understanding. By focusing on the MSME sector, streamlining the supply chain, maintaining low NPAs, expanding into manufacturing, and innovating in customer acquisition, OfBusiness has set itself apart as a leader in the B2B space.

As it continues to grow and evolve, OfBusiness serves as a masterclass in how to build a profitable, scalable business in the often-overlooked B2B sector. The company's success is a reminder that even in the most "unsexy" industries, there are opportunities for innovation, growth, and significant impact.