Analysis of

Tradohub

NOVEMBER 15

Submitted by: Adyot Kumar Srivastava

NMIMS Bangalore

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 Index

S.No. Topic Page Number

1 Company and Business Overview
• Introduction
• History
• Founders
• Business Model 3
• Value Proposition
• Target Customers
• Customers – Geographic Mix
• Funding
• Deal with Infibeam
2 Market Details
• The MSME Market in India – Market Size 7
• Market Growth Potential
• Government related growth drivers for Online B2B market
3 Competitive Landscape
• Competitive Analysis Framework 10
• Inferences from Competitive Analysis
4 USP of Tradohub over its competitors 13
5 • Previous transactions in the sector.
• Valuation model for the company using precedent transaction Excel File
method.

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 Company and Business Overview:

Introduction
tradohub.com is the first Global E-Distributor of Industrial Goods. Tradohub.com is a scalable next
generation B2B e-commerce portal and a powerhouse that throws open the doors and windows of
raw material procurement and delivery for SMEs (Small and Medium Enterprises).The name signifies
its profound meaning- ‘trade hub of raw materials.’ tradohub.com is a leading integrated supplier of
food & agriculture, chemicals, pharma, polymers & additives and other industrial raw materials
globally. The company believes that the Internet would level the playing field by enabling small and
medium businesses to leverage innovation and technology to grow and compete more effectively in
the domestic and global economies. They are located at and operating from Ahmedabad – Gujarat,
India. Tradohub brought over 550 SMEs online and hiked its Revenue to $29.26 Mn in 3 years and
aims to close this year with $74.18 Mn in revenue.

History:
Tradohub was established to supply industrial raw materials for small and medium enterprises
(SMEs). The start-up started off by supplying cashew nuts to small companies. Started with a mission
to empower SMEs to dream big, Tradohub was founded by Akash Domadiya and Harsh Patel in 2014.

Founders:
Akash Damodiya:
A Nirma & IIM – A Alumnus, Akash is a NextGen entrepreneur and passionate business leader who
has a mission to empower SMEs globally. With this aim, He started Tradohub – The world’s first E-
distributor of Industrial Raw Materials. Tradohub, being one of the fastest growing company in USD 1
Trillion market of Indian SME procurement space, we have challenged ourselves and understand
Indian market from scratch and we have developed an innovative business model with a plan to
create global integrated model to empower SMEs across the world.
Prior to Tradohub, Akash has worked as “Chief Minister Fellow” with Prime Minister Narendra Modi
When he was the Chief Minister of Gujarat. He has advised govt. on Solar energy policy & IT for
Agriculture and this has helped govt to form the Solar Policy & IT policy of Gujarat State. He also
established India’s First Solar EVA Film Manufacturing plant in Gujarat as a CEO of Lucent CleanEnergy
Pvt Ltd and during this stint, he has got his expertise into Import-Export, International finance &
logistics and a leadership experience.

Harsh Patel:
Harsh is a BCA from Gujarat University and an MBA Alumnus of Indukaka Ipcowala College of MBA.
He is the co-founder of Tradohub and is currently the CEO and Managing Director of the company.
His responsibilities include Marketing, Client relationship management and Finance.

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Prior to Tradohub, Harsh worked as the CEO of Shree Hari Krishna Renewable Energy Pvt. Ltd which
provided complete assistance in Project Management Consultancy (PMC) and International
Commodities Trading services.

Business Model
Tradohub realised that one of the major problems for Small and Medium enterprises is that they
can’t minimize their costs due to the lack of economies of scale as compared to bigger firms. This also
provides the bigger firms a competitive advantage because they can offer the same products at lower
pricing too and hence getting more market share.
Tradohub works in the was a car pooling does but in the context of SMEs. Tradohub groups multiple
offers of same raw materials and is hence able to leverage economies of scale. Tradohub also
facilitates logistics for these raw materials. The large orders helps Tradohub procure raw materials at
low cost and hence it is able to adjust the logistics cost in the buyer quotes and still retain some
margin from its orders. It also reduces some of its operating expenses by rigorous use of technology
to facilitate the ordering process.

The order flow is as follows:

Tradohub
Buy Grouping
places big
Request of Similar
order with
Placed Orders
Suppliers

Tradohub Tradohub
Buyer to provides
delivers
make the quote to
product to
payment
Buyer Buyer

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Value Proposition
There are value additions for both Buyers as well as Suppliers.

Benefits of Buyer (SMEs):

• Procure raw materials at highly subsidized rates
• Materials delivered from manufacturer to buyer’s factory/warehouse.
• Raise profit margins and nullify economies of scale of large enterprises.
• Reduce inventory and hence free up Working Capital.

Benefits for Supplier:

• Directly reach the large and fast growing MSMEs market.
• Tradohub takes care of cumbersome marketing/distribution/supply chain issues.
• Get large volumes orders aggregated from a group of buyers.

Target Customers
Tradohub supplies the raw materials for following industries:
• Chemical, Additives and Intermediates
• Polymer and Engineering Plastics
• Food and Agriculture Products
• Pharmaceutical Bulk Drugs
• Spices, Oil Seeds and Grains
• Edible Nuts and Pulses
• Metals and Minerals
• Other Industrial Materials

Customers – Geographic Mix

The startup caters to a diverse range of customers from:
• Gujarat
• Madhya Pradesh
• Maharashtra
• Rajasthan
• Punjab
• Delhi
• Haryana
About 65% of the customers are regular customers and hence speaks for the quality of service
provided by Tradohub.

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Funding
Currently, Tradohub is working as a Bootstrapped Start-up with revenue of about $30 Mn and
expanding its operations.
Tradohub has not raised any external funding but is hoping to raise capital to start offering Credit
facilities and plans to launch its own NBFC platform in future.

Deal with Infibeam

In January 2019, Tradohub acquired Infinium from Infibeam in a deal worth Rs 60 Crores. Infinium
(India) Ltd claims to provide customised turnkey systems, solutions and services in the field of
broadband satellite communications. Its solutions and services also include VSATs ((Very Small
Aperture Terminals) used for voice, video, data, internet and broadcast services working in fixed,
transportable, mobile and rural environments.
Tradohub expects that the acquisition of IIL will help the company accelerate growth by targeting
SMEs in consumer-focused sectors where there is significant momentum and an opportunity to serve
the growing requirements.

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 Market Details

The MSME Market in India

Market Size
In February 2018, the union cabinet approved change in the basis of classifying Micro, Small and
Medium enterprises from 'investment in plant & machinery/equipment' to 'annual turnover'.

Classification of Micro, Small and Medium Enterprises (MSME) - New basis

Manufacturing and services sector
Enterprise Category Annual turnover
Micro Enterprises Does not exceed INR50 Mn
Small Enterprises More than INR50 Mn but does not exceed INR750 Mn
Medium Enterprises More than INR750 Mn but does not exceed INR2500 Mn

As per the National Sample Survey (NSS), there were 63.39 million non-agriculture MSMEs in India
engaged in different economic activities in 2015-16 (19.67 million MSMEs were involved in
manufacturing whereas 43.72 million MSMEs were involved in services, of which 23.04 million were
involved in trade). The number of MSMEs in India have increased at a CAGR of 6.4% in the last 9 years
from 36.18 million in 2006-07. These 63.39 million MSMEs employ around 111 million people spread
across urban (55 percent) and rural (45 percent) India which represents around 40% of the working
population of India.

Conducting business online- E-commerce and finance

As per a KPMG Snapdeal report ‘Impact of e-commerce on SMEs in India’, 27 percent of the SMEs
using internet are engaging in use of e-commerce for business92. This implies that less than 10
percent of the overall SME base of 63 million may be engaging in use of e-commerce for business.

Hence bringing the market size to around 71.76 Mn MSMEs in India and 19.37 Mn MSMEs using
internet in India.

Market Size Calculation

The overall B2B market size is expected to grow to around $700 Bn by 2020, according to an April
2016 report by the Confederation of Indian Industry and Deloitte. Tradohub covers 550 SMEs right
now and has huge potential.

B2B Market Size (US$ Bn) 700

Internet Adoption 27.00%
Average Spending on Raw material 70%
B2B ecommerce Market size (US$ Bn) 132.3

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This makes the market size at around US$ 132.3 Bn and this is pessimistic because we have not
considered the Advertising market that can also be tapped later. With an average profit margin of
around 10%, profits of around US$13.23 Bn can be gained. Also, we need to consider that this is the
current size of the market and the market is growing at a long term CAGR of about 6.4%.

Contribution of MSMEs in the country’s economy

The 63 million Micro, Small and Medium Enterprises (MSMEs) in the country contribute a significant
portion to India’s GDP. This contribution from the MSME segment stood at nearly 30 percent in
FY2018, with around 6 percent coming from manufacturing and around 24 percent from the service
segment in past 3-5 years. As per our discussions with SME industry bodies, it was believed that on
the back of government initiatives, the SME segment could target increasing the contribution to GDP
to around 35 percent over the next 4-5 years.

Market Growth Potential

SME Internet adoption in India – Current levels low, but a large opportunity ahead
Getting business online- Internet for businesses. As per the KPMG Google report on ‘Impact of
internet and digitization of SMBs in India’, just 32 percent of SMEs in India were digitally connected in
2017 and 17 percent used internet for business purposes. On the other hand, 54 percent of small
businesses in USA used e-mail for business in 2017 and 51 percent had their own website.
In China, 89 percent of all enterprises were connected to internet by 2015.

Of the 32 percent SMEs that were digitally connected, only 2 percent were adjudged to be using the
full potential of digital technologies while the remaining 30 percent were not actively promoting or
selling their business online. As per our limited discussion with an SME industry body, they believe
that the number of digitally connected SMEs could rise to 50 percent in the next 4-5 years.

Digitization imparts wide ranging benefits to SMEs, ranging from increased online visibility to
improved bottomline. Some of the important benefits are outlined below:
• Increase in customer reach.
• Improved revenue and profitability.
• Increase in employment

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Government Related Growth drivers for Online B2B Market
Make In India
The “Make in India” initiative launched in September, 2014, aims at promoting India as a preferred
investment destination and a global hub for manufacturing design and innovation. The initiative aims
to increase the contribution of the manufacturing sector to 25 percent of the gross domestic product
by 2025.

Good and Services Tax (GST)

The GST rollout in 2017, aims to boost competitiveness and performance in India’s manufacturing
sector. Some of the areas where the GST can potentially have a positive impact on SMEs are
highlighted below:
• Ease of starting a business – GST enables a centralized registration, making it easier to set up
businesses
• Market Expansion – With the GST, tax credit will be transferred across state boundaries,
irrespective of the location of the buyer and seller, which will help expand the market for
SMEs
• Improved logistics and faster delivery of services.
• Reduction of tax burden on new businesses.
• It has also made it easier for B2B e-commerce platforms to onboard the SMEs with ready
documentation.

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 Competitive Landscape

In such a huge addressable market, Tradohub competes against players including Power2SME,
Udaan, IndiaMart, NowPurchase, etc.

We will use a self-developed Competitor Analysis Framework to evaluate the competition and then
compare with Tradohub to see where the company stands.

We will be analysing major competitors i.e. Power2SME, Udaan, IndustryBuying and NowPurchase.
The parameters that will be considered are as follows:
• Business Description
• Geographical Focus
• Revenue and Funding
• Product Offerings
• Customer and Supplier Details

Business Description: Revenue and Funding

Providing online platform and Sourcing input raw
materials for SMEs at the most economical price points
in varied categories and providing logistic support and
financing facilties.
Geographical Focus
Uttar Pradesh, Karnataka, Telangana, Punjab, Orissa,
Andhra Pradesh, Madhya Pradesh
International Finance Corporation (IFC) Nandan
Nilekani, Kalaari Capital, Accel Partners and Inventus
Capital Partners
Total Funding Amount : $77 Mn (7 rounds)
Revenue: $10Mn
Estd: 2012

Power2SME

Product Offering
- Online portal to connect with MSMEs and Suppliers
- Logistic Support for delivery of Raw material
- Access to finance at improved rates of interest
Customer and Supplier
Number of Customers: 3000 MSMEs
Suppliers : SAIL, GAIL, Rathi Steel, Jindal Steel, Haldia
Petrochemicals, amongst several others
Industries: Chemicals, Inks, Paints, Metals, Polymers

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 Business Description:
Providing online platform and Sourcing input raw
materials for SMEs at the most economical price points
in varied categories and providing logistic support.
Geographical Focus
Uttar Pradesh, Delhi, Maharashtra, West Bengal
Revenue and Funding
Funded by family and friends which includes - Nipha
Group, a premier manufacturing export house.
Total Funding Amount : Unspecified- Bootstrapped
Revenue: $ 7.8 Mn
Estd: 2017

NowPurchase

Product Offering
Customer Focus
- Online portal to connect with MSMEs and Suppliers
Number of Customers: 3000 MSMEs
with a smart procurement platform and a Purchase
Management Software Suppliers : NIPHA, PATTON, Linc, CenturyPly, Anmol
Biscuits, IndoRama
- Logistic Support for delivery of Raw material
Industries: Chemicals, Inks, Paints, Metals, Polymers

Business Description: Revenue and Funding

Providing online platform Kirana stores and small Altimeter Capital, DST Global and Lightspeed Venture
businessed at the most economical price points in Partners
varied categories and providing logistic support. Total Funding Amount : $869.9M
Geographical Focus Revenue: $4Mn
PAN India Estd: 2016

Udaan

Product Offering
Customer Focus
- Online portal to connect with MSMEs and Suppliers
Customers: Kirana Stores with over 6000 Tonnes daily
- Logistic Support for delivery of Finished Products transaction
- Access to finance at improved rates of interest Suppliers: Retailers, Manufacturers, Traders,
Wholesalers
Industries: Kirana Stores - FMCG

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 Business Description: Revenue and Funding
Providing online platform and Sourcing input raw Saif Partners, Kalaari Capital and Beenext
materials for SMEs at the most economical price points Total Funding Amount : $39.8Mn
in varied categories and providing logistic support.
Revenue: $6.5Mn
Geographical Focus
Estd: 2013
Uttar Pradesh, Karnataka, Telangana, Punjab, Orissa,
Andhra Pradesh, Madhya Pradesh

IndustryBuying

Product Offering
- Online portal to connect with MSMEs and Suppliers
- Logistic Support for delivery of Raw material
- Differentiation in terms of unique products(about 80%
of catalog) that are not available online anywhere else.
- Access to finance at improved rates of interest
Customer Focus
Number of Customers: 45000 MSMEs
Suppliers : Karam, Allen cooper, Makita, Ador
Welding, Nilkamal, Bosch, Kirloskar, Crompton Greaves
Industries: IT & Electronics, Welding, Testing &
Measuring and Medical Supplies

Inferences from Competitive Analysis:

• Business Description- The companies all have similar business. The difference is inly seen in
NowPurchase and Tradohub because both of these companies pay more focus on upgrading
their technology to leverage the benefits and minimize cost. NowPurchase even has a smart
procurement platform and a Purchase Management Software. The one thing that Tradohub
lacks is the facility of credit to its customers.

• Geographical Focus- Only Udaan and IndustryBuying seem to have PAN India presence. But
Tradohub has major presence in West and South India where all of its competitors also seem
to have presence and hence this is a threat to the market share of Tradohub.

• Revenue and Funding – In terms of Revenue, Tradohub is doing the best while Power2Sme is
the closest competitor. But Tradohub has not raised any funding. Tradohub has grown 300%
while being bootstrapped, while players like Power2SME have grown 250% despite receiving
funding. However, if we have to observe funding, Udaan has received the most funding but
Udaan is not trying to expand into the raw material space which ensures that there are no
threats posed to Tradohub.

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 • Product Offerings: Tradohub seems to have an elaborate catalog of raw materials compared
to its competitors and this hence provides the company with the advantage that competitors
cant affect its market with their current product catalog.

• Customer and Supplier Details: All the major competitors have big names among the
suppliers and a large number of SMEs as their customers. But Tradohub lacks in this. It does
not seem to have any big companies on among its suppliers like Power2SME and
IndustryBuying.

As per analysis, the major issues for Tradohub are as follows:

• Lack of Credit facility to customers
• Lack of Funding for expansion PAN India
• Lack of Big companies among suppliers

USP of Tradohub over its competitors

Following are the areas where Tradohub seems to have an advantage:

• Product Catalog: While companies like NowPurchase and Udaan seem to be offering few
products such as Electronics and Clothing and other competitors like Power2SME and
IndustryBuying having catalog of products broadly different from that of Tradohub, it ensures
that Tradohub has little threat to its market share.

• Funding: Tradohub is still a bootstrapped start-up which ensures that the control of the
company lies with the founders who are well versed with the market. Tradohub has grown
300% while being bootstrapped, while players like Power2SME have grown 250% despite
receiving funding. In fact, the company also has opportunities of further expansion if it tries to
raise funding.

• Expansion Plans: Unlike any competitors, Tradohub has a long term view of expanding into
NBFC business. This provides a competitive advantage to the company because the company
will be able to raise cheaper funds and provide better credit facilities to its customers later.

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• Previous transactions in the sector.
• Valuation model for the company using precedent transaction method.

The above 2 topics have been covered in the excel sheet attached with the document.

If you wish to access the Excel sheet, you can also click here:
Financials and
Valuation.xlsx

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Resources Used:

• Thomson Reuters Refinitiv Eikon Terminal

• Ministry of Corporate Affairs Website
• The Hindu Business Line
• Inc42 Website
• Owler
• Crunchbase
• Craft.co

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