Back to Blog

100 CR Ecommerce Opportunity In Mining Sector

Mining sector may soon witness a spike in eCommerce activity with Government of India showcasing immense opportunity to the Engineering, Procurement and Construction (EPC) Companies through privatization initiatives. An opportunity of $1.77 billion or Rs 1.33 lac crores has been talked about in Invest India government website to enhance private investments in the mineral sector.

It is expected that these EPC contractors, post winning the contracts, would search for suitable eCommerce partners to outsource their non-core functions, industry observers felt. Non-core activity of EPC mining contractors include buying or leasing various items economically and selling the excavated products at the highest price possible.

When such activities gets outsourced, the eCommerce companies normally charges a percentage of transaction made as fees. eCommerce revenue in the buy and sell side may amount to 0.1% of the investment made, commented ex-Chief General Manager of Coal India, P.P. Sengupta. This would roughly translate to Rs 133 crores revenue for the eCommerce companies.

According to the eCommerce major mjunction services limited, there is a definite opportunity which is emerging and worth exploring. “Several mining development and operations contracts are already in various phases of finalization by RA & ASS BU of our company”, Ashish Goel, head of marketing, mjunction services limited said. The Reverse Auction & Assisted Sourcing (RA&AS) team negotiates the best rate for high valued items through technology platform to give market driven dynamic rates to its clients. Incidentally, mjunction has mineral selling service also and procurement and selling service can be offered together as a combined service to any EPC company, an industry expert said. “We have experience in supporting mines with MSS, RA and FA services, and also a little bit asset sales,” said Manish J K Mathur, Chief of MSS PSP services, mjunction services limited. Steel and mineral is normally sold through FA or Forward Auction and idle asset is also sold in a similar fashion by the company.

Interestingly, procurement is by far the most valued activity in any EPC company as no two projects happen nearby and transferring material from one project to another is next to impossible. We therefore prefer to remain asset light, commented Satyavrat Singh, CEO of Uniseven Engineering and Infrastructure Pvt Ltd. As a case, in one Rajasthan project, Uniseven required to install 7 cranes with capacity ranging from 80 to 500 ton. “Subsequent project requiring the same cranes was in Coimbatore and moving cranes from North India to South India was practically impossible,” Singh said. Getting the cranes leased out for both location was therefore the best option and for that good procurement skill is necessary at the two hubs. Incidentally, a 500 ton crane may cost upto Rs 20 crores and EPC industries are mostly leasing such equipment to remain competitive, an industry observer commented. Also outsourcing the negotiation services through eCommerce companies is a better option here to limit unnecessary addition of resources in the EPC companies.

However, size of mining tender would determine whether eCommerce service providers would benefit out of these privatization initiatives. According to the announcement made by the government in May 2020, nearly 50 coal blocks would be offered through bidding process for private participation immediately. There would be no eligibility conditions, but the eligible bidder needs to make upfront payment. EPC contractors like Uniseven can take up projects to the size of Rs 10 – 50 crores. “We cannot take Rs 100 crores project as we have fund limitation,” said Satyavrat Singh, CEO Uniseven.  This is because for Rs 100 crore project, an advance bank guarantee of Rs 10 crores is required. Further, party has to also make an upfront security deposit of another Rs 10 crores.

According to industry observers, if tenders come out in size more than Rs 100 crores, it would be less competitive in the bidding process also as would be taken up by heavyweight EPC contractors such as L&T, HEC, Nagarjuna etc. There would not be much competition in such tenders as the smaller EPC contractors would be weeded out.

These heavy weight companies also may not like to outsource the procurement or selling functions to eCommerce service providers as they have adequate in–house resources to address the need, the observer commented.

 

Authored by

Rajkumar Mitra



More Blogs

100 CR Ecommerce Opportunity In Mining Sector

Mining sector may soon witness a spike in eCommerce activity with Government of India showcasing immense opportunity to ...

Read More

Rajkumar Mitra

Force Majeure – Impact on Contracts (COVID19)

Emergence of Novel Corona Virus (Covid-19) is having an unprecedented impact on the human race, businesses and nations, ...

Read More

Alok Pal

Impact of COVID19 On Indian Logistics

The logistics industry is working hard to catch up with demand and supply that’s being affected by COVID-19. But w...

Read More

Debjit Mukherjee