Chennai: With continual
improvements in supply chain practices, coupled with the
adoption of JIT (just in time) inventory methodologies, it
may be logical to expect the elimination of inventory
build-up and the problem of surplus inventory. But no, sale
of scrap material is an integral part of the manufacturing
process, says Mr S. JaganniVasan, founder and managing
director of Matex Net Pvt Ltd, Bangalore. “And I believe
this will continue to grow,” he adds.
What is scrap to a seller
could be an asset to the buyer, emphasises Mr JaganniVasan,
during a recent interaction with Business Line. “Piling up
of inventory happens due to obsoleteness in technology.
While inventory pileups and JIT could take care of the
supply side from the raw material angle, the inventories
that we deal with are from process and obsolescence of
machinery and spares,” he explains.
Matex Net, an online
material exchange company that is active in the B2B
(business-to-business) market space, had started off as a
bulletin board service in the mid 1990s. Entering the area
of online sale of surplus inventory/ scrap, at a time when
it was still considered risky, and when the advantages of an
e-auction were not easily accepted, Mr JaganniVasan
reminisces how he had to work at popularising the model, by
being continuously on road reaching out to corporates and
the Government, as well as speaking at seminars to drive
home the benefits of transacting online.
The hard work of that
early period seems to have paid off for him. The company,
which has an investment from ICF Ventures, has created a
niche for itself in this space and currently employs over
120 people, with offices across the country. Having
established a strong presence in the domestic market, Matex
Net is readying itself for an expansion into the South East
In this interview,
JaganniVasan talks about the early challenges he had to
encounter including educating the market, the drivers in
this business and the company’s plans to expand into the
industrial towns in the country.
How did the idea of
selling of scrap/ second-hand assets originate?
I always had an interest
in inventory management, and the issue of inventory carrying
costs was something I debated within myself. I had this view
that what was surplus to one could turn out to be a buying
opportunity for another.
Initially, it was a big
challenge as we had to educate our customers and make them
feel comfortable about transacting online. However, the
first mover always faces such challenges. Internet
penetration, connectivity and Internet suaveness were real
issues early on – some we could handle and a few others
that we could not. It was a big learning exercise.
It was only when the
sellers saw more bidders coming in, did we witness an
effective market making and a higher price realisation
through this mode. That’s how we started building our
credibility and the customer base.
What are the product
lines/verticals that you are focusing on? What are the
drivers in this business?
Currently we are focusing
on two verticals – trading, where we deal with forward and
reverse auctions, and motors, where we are involved with the
sale of repossessed vehicles for banks and NBFCs and new/old
vehicles for corporates.
Market making, number of
bidders and price maximisation are the key drivers of this
business. We look for opportunities in areas that allow us
to use the e-auction platform.
Are there plans to
expand into more locations within the country?
While our initial
expansion was in the South, we now have a pan India presence
with offices in over 20 locations, including in all the
metros and mini metros. Every industrial town presents an
opportunity for us to target and expand. Our plan is to
reach these towns through a ‘hub and spoke’ model.
What is the thought
process behind your expansion into online sale of
second-hand motor vehicles? What are your plans in this
While individual owners
may go to established players, we believe there are
opportunities in tier 2 and 3 towns, where bulk purchase
happens. Travel agencies and BPO companies replace their
vehicles at periodic intervals. Also, repossessed vehicles
by banks and NBFCs come to the market for sale. We are
targeting this space, as we think we can offer a better
price discovery mechanism.
Are there new
verticals you are looking to expand into this year?
Our plan is to firm up
the automobile vertical as it is yet to become mainstream.
We may look at adding mining and earth moving equipment this
year which will form part of the motors segment. Sale of NPA
(non-performing asset) is another vertical where we are
looking to gain a foothold this year.
What is your revenue
model? What is the value of transactions you put through
Matex Net collects a
percentage of the sale value on cleared material. We
completed about Rs 450 crore worth of online sale of excess
inventories last year and we are targeting to achieve about
Rs 750 crore this year.