OfBusiness Aims to Raise $25M in Series C Funding in the Coming Few Months
Asish Mohapatra, CEO & Co-founder, OfBusiness (B2B financing platform for SMEs with a fulfillment engine) is a goal-oriented industry veteran with a VC background (Matrix Partners). Through OfBusiness, he has created world's first-of- its-kind technology-driven SME financing and product fulfilment platform. This enables SMEs to get secured and unsecured credit line & cost-effective raw material procurement. Thereby, facilitating their in-built 'Technology' to successfully merge 2 business in a seamless manner for maximum profitability and major problem solving for MSMEs in India (i.e. Finance & Raw materials).
In an interaction with BW Disrupt, Asish Mohapatra (VC turned Entrepreneur), CEO & Co-founder, OfBusiness shared details about his venture.
I spoke to Power2SME, a company that provides similar services to SMEs as you. How do you think OfBusiness is different from others firms in the same domain?
Our basic philosophy from Power2SME is different. We are a financial services company that is into lending for SMEs, which today is focused on “purchase financing” of raw material today for guaranteeing end use, but would branch into other avenues of lending in SMEs as we evolve and scale up.
There are several financial institutions that aspire to build a SME loan book, we would be different from them in that we follow a “win-win” approach for us and the SME. We provide loans through "purchase financing" limits to SMEs, which the SMEs can use for procuring raw materials. These raw materials (we do metals, polymers, papers and electrical ancillaries) are in turn aggregated by us from the SMEs to the manufacturers and a bulk of the aggregation benefits are passed onto the SME.
The SME finds the above approach beneficial because he gets access to institutional credit (which is both cheaper and more reliable than the vendor financing that he avails today) and cheaper raw material, purchasing of which contributes to >60% of his revenue.
OfBusiness gains from the fact that the provision of raw materials guarantees “end use” of funds and also a more frequent access to the SME (since they keep coming back for raw material purchase), which gives it a significant edge in health metrics of the portfolio.
What’s the reason for inclining towards manufacturing and construction sector (over services sector)?
Our belief has always been that the real disruption potential for both innovation and scale are in the commanding heights of the economy, manufacturing and infrastructure. They are much bigger in both need and scale than the services sector, and have been ignored hitherto by financiers, hence leading to a lot of inefficiency and informal channels for provision of capital.
The company has raised Rs 110 crore over the last 18 months. Where all has this funding being deployed to? Will we witness further investing?
A large proportion of the funds have been used to build the lending book, which is gradually going to shift towards debt as the portfolio seasons and scales.
OfBusiness has also done a significant investment in technology. Combining financing and fulfillment, two very different operating models, is done by OfBusiness seamlessly through technology. Everything from lead acquisition to underwriting to fulfillment of raw materials and settlement of loans is built on an in-house built ERP backbone called OASYS. There are several first of its kind global products for each constituents of the SME ecosystem (Customers, Suppliers, QC providers, Loan providers, OFBians’ usage across functions) that are built on OASYS. Some select products built on OASYS are as below -
Ø OfBusiness does lead acquisition online by capturing the SMEs as they bid and win tenders (aided by OfBusiness), which makes the marketing effort efficient in both cost and quality
Ø Underwriting of loans by OfBusiness is done by not only evaluating the financial data of the SME, which at times is woefully inadequate, but also several other alternate data sources of SME operations, which are contributed by the SME community of buyers and sellers
Ø Fulfilment of raw materials is done by OfBusiness using a unique bidding engine that helps both buyers and suppliers get discovery and commercial benefits
OfBusiness is at a stage today where it would continuously invest across the two areas that are core to it - 1) Building the book till debt lines are healthy enough to reduce reliance on equity funding and, 2) creating more modules of technology that would seamlessly integrate SMEs into the OfBusiness’ vision of creating a network that "Spurs the Small and Medium to huge”. In line with the current growth plans of the Company, OfBusiness aims to raise a US$25M Series C in the coming few months.
How many SMEs do you provide services to? What would your average order value and majority of business comes from which sector and region?
We would have an active user base of ~1,000 SMEs. But these SMEs would be highly integrated with us for their credit and material requirements. Our average loan size is INR 40 lakhs and a typical loan tenure is 60/90 days. Most of the above loans are concentrated across auto/ auto ancillaries, capital goods makers and infrastructure services. OfBusiness is strong in the north around NCR, Haryana, Western UP and in the South across Hyderabad and TN. It has branched out recently to Karnataka and Gujarat. Of the often quoted, 350+ SME clusters in India, OfBusiness touches about 20.
According to you, what has been the impact of GST on the SMEs?
With indirect tax boundaries going away and India becoming one unified economy, SMEs are more bullish more than ever. SMEs are now beginning to think about growth than just efficiency in operations. The fact that capital is also slowly and surely becoming valuable to the SMEs is also helping the sentiment. We can already see that close to 50% of the OfBusiness SMEs have applied for an upward revision since the GST roll-out.
