The Master Builder: Entrepreneur Asish Mohapatra and the birth of two unicorns

In just eight years, Asish Mohapatra and his team have not only forged a flourishing category leader but also gave life to not one, but two unicorns. Now, this sector-aware operator is preparing to face the public market

On a vibrant Mumbai night in early 2015, Asish Mohapatra and his companion Bhuvan Gupta were immersed in a conversation that crackled with energy. That would set the stage for something extraordinary. Amidst the lively banter, Mohapatra opened up about his dream of launching a B2B venture, extending an intriguing invitation to Gupta. Without a moment’s hesitation, Gupta, then poised to become the Chief Technology Officer at the flourishing Snapdeal, nonchalantly shrugged and said: “Sure.” Little did they fathom that that spontaneous exchange would chart the course of their future in unforeseen ways.

“I don’t know if he agreed because he was tipsy. I’m not even sure if he heard the word B2B,” muses Mohapatra, winner of the BT-PwC India’s Best CEOs award in the Unicorn category. However, beneath the laughter, a deeper bond of mutual trust anchored the connection between Mohapatra and Gupta. Mohapatra emphasises that he would have readily reciprocated had Gupta been the one extending the invitation. Thus, fortified by this unspoken pact, Mohapatra assembled a dream team comprising Ruchi Kalra (Mohapatra’s wife), Vasant Sridhar, Gupta, and Nitin Jain. United by trust, they embarked on a collective mission to forge a path in B2B for small and medium enterprises (SMEs).

The decision involved significant personal risks as both Mohapatra and Kalra left their respective jobs—Mohapatra as an investor at Matrix Partners and Kalra as a Partner at McKinsey & Company. They relocated from Mumbai to Delhi, with their new-born baby in tow, to set up the business.

Why B2B? Mohapatra’s thesis was simple. In his line of work as a non-tech VC focussing on healthcare, consumer goods and manufacturing, he saw an uptick in B2B pitches from late 2014 through 2015. He was quite familiar with most of the solutions being built and felt many of them did not understand the sector well. He also saw a lot of qualified people—people with good pedigree and work experience—going into that sector. Above all, it marked a crucial and necessary career expansion for him as he was advised to explore technology investments for career growth, and he decided to take on the challenge himself, acknowledging the learning curve it would entail.

Right out of the gate, the team laid down five principles as the foundation of the company. They aimed to “help underserved SMEs, extend beyond just lending, ensure meticulous collections, fuel growth through debt, and maintain profitability.” And they stuck with it.

OfBusiness made three commitments to SMEs. Firstly, they pledged to always offer a better price for industrial goods than any other available option by sourcing materials directly from the origin, eliminating middlemen. This ensured a price advantage. Secondly, they guaranteed on-time delivery, building trust. Thirdly, they assured SMEs that all quality testing and QC reports would be provided with the delivery, ensuring product quality.

On these founding principles, OfBusiness kicked off with steel as the first category. They recognised the broken and opaque nature of the steel supply chain, facing problems like logistics, last-mile delivery along with pricing complexities. It then diversified into aluminium, copper, and zinc because the entrepreneurs saw that these sectors too grappled with similar challenges. Eventually, OfBusiness entered into polymers, petrochemicals, and chemicals.

The business quickly gained momentum, pulling in revenue from the get-go in February of 2016. Within just two months, by April, it reached a monthly turnover of Rs 10 crore. By the 36 month mark, OfBusiness was consistently hitting Rs 100 crore in monthly revenue.

Currently, steel constitutes 35% of the business, followed by aluminium, copper, and zinc in the nonferrous category at 16-17%, petrochemicals at 10%, agriculture at 15%, chemicals at 7-8%, and polymers also at 7-8%, with the rest made up of two-three smaller segments.

To make the operations seamless, the company also developed various in-house tech products, including BidAssist for tender sourcing, SMEAssist for digitising SME operations; Ved AI, which is a pricing engine; OxyV for invoice discounting; Oasys for commerce ERP (enterprise resource planning); Tracecost for construction project monitoring; and other tools for lead management and loan processing.

At the other end of the spectrum, building a robust supply chain also presented its own set of challenges.

“I remember sitting outside the office of the Steel Authority of India, during our early days, for close to about four months before they actually agreed to give us a chance. It was the same across suppliers. We were thrown out of a couple of companies, one being Sangam TMT, which we ended up buying later,” Mohapatra says.

As the business gained momentum, it began providing credit through a marketplace model, collaborating with banks and non-banking financial companies (NBFCs). However, the team quickly realised that banks and NBFCs were hesitant and took time because they lacked trust in the company’s underwriting, mainly due to its relatively small scale. “By the time they gave us a limit for credit, we would have lost the purchase order. So, we decided to do it on our own and that is how Oxyzo was born,” he says.

Oxyzo, its lending arm, was launched in June 2018 and OfBusiness stopped third-party lending. Led by Kalra, Oxyzo is particularly pertinent for smaller SMEs seeking purchase financing. In May 2022, Oxyzo became a unicorn when it raised its first round of external funding. OfBusiness has close to 75% stake in Oxyzo.

OfBusiness, which first raised $4.3 million from Mohapatra’s former employer Matrix Partners, subsequently drew the interest of major global private investors such as SoftBank, Tiger Global, and Alpha Wave Global. The company was valued at $5 billion in its last round in 2021.

The aggregation business for raw material procurement accounts for 72% of its revenue today, while 16% comes from processing, and 12% from manufacturing.

Talking about the reasons behind OfBusiness’s profitability, Mohapatra says it was because they knew how to spend less. “We broke even in FY18. The first full year of operating profit was in FY19. We are very frugal, we didn’t have much of an operating expense, we never did loss-making transactions, we did sales with no marketing, never sold things at a discount,” he explains.

Mohapatra emphasises that while the market opportunity is massive, the primary focus should be on ensuring that growth does not compromise quality or profitability, a temptation many start-ups fall into.

“Even at our current scale, we can easily compound at 40-50% CAGR for the next five years. We are at close to Rs 20,000 crore (annual revenue) now. At our scale, the challenge is to keep generating more profits, the profitability growth has to be faster than revenue growth, we should not be taking wrong capital allocation decisions, and we need to make sure business is very clean, meaning there should not be any concentration risks,” he says.

No wonder, therefore, that industry watchers are happy. Sarthak Misra, Investment Director at SoftBank Investment Advisers, praises Mohapatra’s disciplined cost control, which he says is deeply rooted in an early understanding of B2B’s thin-margin nature. This, according to Misra, will help the company not only to stay committed towards profitability, but will also help it scale.

“Mohapatra understood from day one that a B2B marketplace is a thin margin business. The founders set the example right from day one that you need to make profit on every transaction and collections should be a priority focus for everyone. Mohapatra heads collections even today. Everybody from the youngest employee in the company to the founders, have focussed on this from day one, and that has allowed them to achieve scale profitably,” Misra says.

As for the future, Mohapatra sees a huge market opportunity in what they are doing and plans to stick to the current categories for the next three to four years at least. Moreover, after eight years in business, the company is now getting ready for its debut on the public markets, expected in the next 15-18 months.

For Mohapatra, steering the ship as a category leader isn’t just a role—it’s a commitment. He rolls up his sleeves, dives into the challenges, and works relentlessly to ensure the venture generates value for everyone in the ecosystem, from suppliers and SMEs to his investors.

Source:- Business Today