buyjunction connect, april 2014

April, 2014issue 6

1

Content: Sourav Chakraborty,

Dipam Banerjee, Soumyashubha

Ghosh, Atanu Saha

Category Report: Hanif Zaman,

Vani Burra, Arun Banerjee

Mentor: Vinaya Verma, Linus Lobo

Editor:

Subhajyoti Roychowdhury

Current Economic Scenario......................................................................

Business Confidence Survey................................................................

Category Report - Electricals.......................................................................

buyjunction Case Studies.....................................................................

New Clients signed up.............................................................................

Credits

From thedesk of The state of world economy has been the most decisive factor affecting the fortunes of every

developing country. The world economy has been witnessing a sliding trend in growth, from 3.9 percent in 2011 to 3.1 percent in 2012 and 3 percent in 2013. Though the ride in 2013 has been bumpy for the Indian economy, we have seen that it is slowly gathering momentum. The World Bank has projected India's economy will grow over 6 percent in 2014-15 and 7.1 percent by 2016-17 as global demand recovers and domestic investment increases.

With this sixth issue of buyjunction connect we try to bring to you the economic scenario, industry trends, market analysis and a report on Electrical Cables. The newsletter also captures a success story in the cement category where we could deliver substantial savings for a client.

We hope that this newsletter will help you understand how we add value to our client’s business through innovation and in-depth analysis of their requirements. We only strive to create win-win deals for you.

Regards,

Vinaya Varma,Vice President, buyjunction

Index3

5

11

13

15

Vinaya VarmaVice President,buyjunction

3

India's headline inflation rate edged up to 7.5 percent in November 2013 from 7.0 percent in October 2013. Prices rose at its faster pace since September of 2012 mainly due to higher food articles and energy costs. The index for food prices rose by 20 percent driven by higher prices of vegetables (95 percent), rice (15 percent) and fruits (14 percent). Energy costs were up 11 percent due to higher prices of high speed diesel (16 percent), liquefied petroleum gas (11 percent) and oil (4 percent). Manufactured goods prices rose 3 percent.

HSBC India Services Purchasing Managers’ Index™

(with Composite PMI data)

HSBC India composite output PMI50 = no change on previous month, S. Adj.

Increasing rate of growth

Increasing rate of contraction

60

55

50

45

402006 2007 2008 2009 2010 2011 2012

Source: Markit, HSBC.

40

2013

65

Private sector output falls for sixth monthrunning in December

Summary

Business conditions in the Indian private sector economy continued to deteriorate in December. At 48.1, the seasonally adjusted HSBC India Composite Output Index posted below the crucial 50.0 threshold for the sixth consecutive month. Moreover, the index dropped from November’s 48.5, indicating a slightly faster rate of contraction. Whereas manufacturing production expanded, services output fell.

Adjusted for seasonal factors, the HSBC Services Business Activity Index fell from 47.2 in November to 46.7 in the latest month, indicating a solid and accelerated rate of contraction. Moreover, this was the sixth consecutive monthly drop in output levels, which is the longest period of continuous reduction since the 2008-2009 global financial crisis.

Underpinning the latest fall in services output was a solid decrease in incoming new work. New business contracted at the quickest pace since September, with panellists reporting an increasingly fragile economy and competitive pressures. There were a few mentions that the upcoming elections had also contributed to the latest drop in new orders. Across the private sector as a whole, new business decreased at a faster, but moderate pace.

Four of the six broad areas of the service economy registered lower output volumes, while new business contracted in five categories. As with the trend for output, the sharpest decline in new orders was noted at Hotels & Restaurants. The Post & Telecommunication sub-sector remained resilient, with growth of both business activity and new orders recorded.

Outstanding business at both service providers and manufacturers increased in December, leading to a further accumulation of unfinished work in the Indian private sector. Although modest, the overall rate of increase was above the

long-run survey average. December data indicated that private sector employment rose. The latest increase in payroll numbers was broad-based with both manufacturers and service providers posting job creation. Average purchase costs at services companies rose further in December, amid reports of higher prices paid for fuel, food, transportation and electricity. That said,the rate of cost inflation was only moderate and the weakest since July. Input price inflation in the private sector as a whole eased to a six-month low. Additional cost burdens were passed on, as prices charged by private sector firms were raised for the fifty-fifth consecutive month in December. The latest increase in tariffs was, however, marginal and below its average. Indian service providers remained upbeat about the prospects for business activity in 2014. Furthermore, the degree of confidence was the strongest in five months.

Positive sentiment was linked by companies to forecasts of better economic conditions and hopes of higher demand. Some firms also mentioned that output is anticipated to grow after the elections.

Comment

Commenting on the India Services PMI™ survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said:

“The service sector continues to face head winds, withweakening new business dragging down activity. On apositive note, inflation pressures are easing andoptimism about the coming year is rising.”

Key points

Service activity contracts, while manufacturing production increases

Moderate reduction of new orders across private sector

Renewed growth of private sector employment

Historical Overview

5

-400

-600

-800

-1000

-1200

Things have started looking up a bit for the overall Indian economy, according to the latest Business Today-C fore Business Confidence Survey. The survey for the October-to-December 2013 quarter found sentiment among corporate leaders had improved marginally compared to the previous quarter.

On a scale of 100, confidence level was at 48.6 in the third quarter of 2013-14, up from 48.2 in the previous three months. Market research agency C fore quizzed 500 CEOs and chief financial officers across 12 cities for the survey.

Apart from the overall index, some parameters also saw moderate improvement. For instance, 33 percent of the respondents expected the overall economic situation to worsen during the October-to-December period when they were surveyed at the end of September. Now, fewer respondents - 12 percent - expect the overall economic situation to worsen in the January-to-March period.

Similarly, 24 percent of the respondents saw their demand conditions worsening during the July-to-September 2013 period (compared with April-to-June 2013). The corresponding figure for the October-to-December 2013 period is lower at 15 percent, hinting at an uptick in demand conditions.

Business confidence hit a high of 74.8 in the quarter ended March 2011, when the survey started, before dropping to its lowest point in July-September 2013. Sentiment in the first half of this financial year was largely subdued due to many factors, including the sharp rupee depreciation, the soaring current account deficit, weak economic growth and stubbornly high consumer inflation.

The situation improved on some of these fronts in the October-to-December quarter. For instance, the current account gap narrowed to US$5.2 billion, or 1.2 percent of gross domestic product (GDP), in the second quarter of 2013-14. GDP growth too inched up to 4.8 percent during the same period, 40 basis points higher than the first quarter of 2013-14.

The survey shows 27 percent expect exports to pick up in the January-to-March quarter.

The repo rate set by the Reserve Bank of India (RBI) - which was left unchanged at its last monetary policy review- will certainly impact business in the January-to-March quarter, say 69 percent of respondents. A substantial 75 percent do not expect any change in the overall economic situation in this quarter.

Raw material costs remain a concern for companies, with 89 percent of respondents expecting costs to either go up or stay the same in the January-to-March quarter.

Eighty percent expecting no change in investment plans in the January-to-March quarter.

According to the survey, 34 percent expect profit growth to deteriorate in the January-to-March period.

Still, a high 91 percent expect production levels to rise or remain the same in the January-to-March quarter.

Surprisingly, nearly 40 percent expect stock prices to pick up in the January-to-March quarter.

52.453.8 54.5

48.7

48.248.6

Apr-Jun 2013

July-Sept 2012

Oct-Dec 2012 Jan-Mar 2013

Jul-Sep 2013

Oct-Dec 2013

Business Confidence Survey

Confidence recovers fromthe lowest point ever

A MINOR REBOUND

7

STATUS QUO The Majority of respondents saw no change in the December 2013quarter from the previous quater

Overall Economic ConditionsNearly three-fourths felt overall conditions had not changed

Business across the board with witnessed a small risein confidence in the October-December quarter

Moderately Worse

Substantially Better

Moderately Better

Same/No Change

3

Substantially Worse 2

13

10

72

40

2005 2006 2007 2008

Finance AvailablityMost felt Fund availability was muchsame as before

9


Moderately Better

6

Substantially Worse

Moderately Worse

Same/No Change

68 15 2

Demand ConditionsSo too was the case with demand


Substantially Worse

ModeratelyWorse

Same/No Change

Moderately Better 18

116

1

64

53.8

Hiring ConditionsFever than 20 percent felthiring had improved

70Same/No Change


Substantially Worse

Moderately Better

Moderately Worse

14

10

3

3

...................

..........................

....................

..........................

..........................

Profit MarginsLess than 15 percent said profit marginswere better

74Same/

No Change

2Substantially Better

12 ModeratelyBetter

11

ModeratelyWorse

Substantially Worse

..........................................................................................................................................................................................................

..........................................................................................................................................................................................................................

.........................................................................................................................................................................................................................

Figures indicate percentage of respondents

1

9

Cost of External FinanceNearly one-fourth expect an improvement


Same/No Change

Moderately Worse

Moderately Better

Substantially Worse

14

56

18

6

6

Subs

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Bette

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6

Production Levels About two-thirds have little hope of change

3

66

21

4

Future Investments Four-fifths see no change ininvestment climate

80

Subs

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Wor

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Mod

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Wor

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Subs

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Bette

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............................................................................................................................

Subs

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Bette

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Inventory of Raw MaterialMost feel that situation will remain unchanged

6 7 64 18 5

............................................................................................................................

Selling Prices PickupFew expect selling prices to rise

75

Moderately Better11

15

Same/NoChange

............................................................................................................................

10

32

Moderately Worse


Substantially Worse

............................................................................................................................................................................................................................................................................................................

3359

11

MethodologyMarket research agency C fore conducted the survey. The field work was conducted in December 2013. Five hundred CEOs or CFOs from different industries were interviewed. The survey was carried out in 12 cities - Delhi, Mumbai, Chennai, Hyderabad, Bangalore, Kolkata, Chandigarh, Lucknow, Nagpur, Kochi, Visakhapatnam and Bhubaneswar. The companies were

segmented based on their turnover and the products they offered. Those with a turnover of over Rs 500 crore were termed big, those between Rs 100 to Rs 500 crore medium, those with a turnover less than Rs 100 crore small, and those less than Rs 5 crore micro businesses.

Category Report - Electricals

Cables

Introduction:

The cable industry has grown from being a very small, fragmented industry to a very large industry of nearly Rs. 25,000 crore over the years. India has become a hub of cable manufacturing with more and more organized players coming into business and also setting up of facilities by overseas manufacturers in India. The cable segment makes up for 26.5 percent of the entire electrical industry today, which is expected to double in size over the next five years. However, about 35 percent of the cable industry is still dominated by the unorganized players.

The cable industry has clocked a growth of 16 percent in 2010-11 in kilometre terms as against 12 percent in 2009-10. It has registered a sharp deceleration in growth to the tune of almost 26 percent in 2012-13 in kilometer terms as against last fiscal.

The demand from power generation units is on the rise. LV and EHV power cables witnessed a steady growth of about 10 percent. However, with changing specifications, kilometers are not the sole barometer to judge the growth of the industry. Though there seems a slight volume growth in the industry, the same is due to increase in commodity prices. Production in Power cables declined by 23 percent whereas Control & special purpose cables by 33 percent respectively. On the other hand Arial Bunched Cables, continued growing at more than 30 percent due to shift from bare conductors to insulated.There are more than 120 cable manufacturers in India out of which, around 35 percent are in the unorganized sector.

Factors Influencing Growth of the Industry:

The growth is mainly attributed to increase in demand from sectors like state electricity boards (SEBs), power generation and construction.

The drivers include the huge investments made by various private companies in power sector as well as the increasing budget allocation by the government on the power sector. Power sector is the largest consumer of cables in India. Another important driver is the rollout of 3G and broadband on a pan-India basis which will boost the market as demand will increase as players look to enhance broadband penetration levels.

Government impetus in refineries, power and fertilizers offer a boost to the cable industry as almost all manufacturing companies need cables. Robust industrialization and growing urbanization are the other important drivers identified. Auto sector and railways are the other important sectors consuming wires and cables on a large scale. Additionally, growth will be fuelled by urbanization as cables and wires will be required in buildings and offices.

Major Cost Drivers:

Major cost drivers which affect the pricing of cables are

(i) Aluminum and Copper prices which are dependent on LME

(ii) PVC compound

(iii) Steel for armouring

COPPER: (Cu) PRICE OF COPPER WIRE RODS Rs./MT

4.58

Apr/13 Jul/13 Oct/13 Jan/14Mar/13 Nov/13 Dec/13Aug13 Sep/13May/13 Jun/13Feb/13Jan/13380000

400000

420000

440000

460000

480000

500000

520000

MRO

Packaging

Project

Refractories

Steel

Category-wise savings and Transaction Value

13

90.39

1.28

456.47

132.78

1.95

11%

1%

8%

11%

1%

Last one year price trend of the above mentioned cost drivers are being mentioned next below:

Category Management Service Snapshot

No of PR processed 1798 1855 1839

PR Value (Rs. Lakhs) 1108.6 1026.3 9230.8

Avg Negotiated Savings 10% 8% 8%

Avg Cycle Time (Days) 29.1 29.2 31.7

Category wise savings and Transaction Value (During the period from 18-11-2013 to 31-12-2013)

Category TV in crores Savings %

Chemicals & Minerals

Contracts and Services

Electrical

Ferro-Alloys

Logistics

218.72

48.54

14.61

216.99

7.31

6%

11%

12%

3%

12%


PR to PO activity Oct'13 Nov'13 Dec'13

15

New Clients Signed up

1. ITC-Personal Care Products Division

Sourcing and Procurement of FUEL and Canteen Services

Contract Duration- 1 year

Item Category- Hi-Speed Diesel & Furnace Oil (FUEL) and Canteen Services for few of their plant locations

Challenges / Requirement:

a. Enhanced Savings and better payment terms for Fuels which is a very oligopolistic market (BPCL, IOCL, HPCL)

b. Credible vendors for better service standard, Savings from LPP for Canteen Services, Comprehensive Contract terms Solution / Service from mjunction- Assisted Sourcing Service.mjunction's scope was to help ITC in sourcing vendors, administer the procurement process (RFQ management), Negotiation and set-up a proper contract.

mjunction did it through their robust Category and Sourcing expertise using Aggregation as a tool for Fuels to achieve the desired results. For Canteen, our category expertise was coupled with our adaptive negotiation strategy and reverse auction methodology for achieving savings and source credible vendors.

2. Tata Teleservices

Sourcing of high-end and low-end laptops

Contract Duration- Work Order basis for a single project

Item Category- Laptops (IT Hardware)

Challenges / Requirement-Effective e-auction platform for Price discovery and negotiation, Achieve Negotiated Savings, Comprehensive Contract terms

Solution / Service from mjunction- Assisted Sourcing Service. MJ's scope was to help TTL in sourcing vendors, administer the procurement process (RFQ management), Negotiation and set-up a proper contract.

Our Comprehensive category expertise was put to test to set-up an effective e-auction strategy for achieving the desired results

3. Tata Projects

Sourcing of Professional Service provider for data Sanitisation & Material codification for TPL


Item Category- Service Contract

Challenges / Requirement- Credible vendors for better service standard, Effective e-auction platform for Price discovery and negotiation, Comprehensive Contract terms

Solution / Service from mjunction- Assisted Sourcing Service. mjunction’s scope was to help TPL in sourcing vendors, administer the procurement process (RFQ management), Negotiation and set-up a proper contract.

Our Comprehensive category expertise was put to test to source credible service providers and set-up an effective e-auction strategy for achieving the desired results.

mjunction is the largest ecommerce company in India.It is a 50:50 venture promoted by the Steel Authority of India Limited (SAIL) and TATA Steel.

corporate officemjunction Services Limited Godrej Waterside Tower – I, 3rd Floor, Plot No. 5, Block – DP Sector – V, Salt Lake City, Kolkata – 700091, WB, IndiaTel: +91 33 6610 6100 Fax: +91 33 6610 6187/ 6179 / +91 33 6601 1719 / 1720

registered officeTATA Centre,

43 Jawaharlal Nehru Road,Kolkata 700 071

Tel: +91 33 6610 6100, 2288 2606 Fax: +91 33 2288 2078

[email protected] [email protected]

16

www.mjunction.inwww.buyjunction.in



Ghosh, Atanu Saha




Editor:


India's industrial economy is gathering momentum on the back of improved output of 8 core-sector industries – coal, crude oil, refining, steel, cement, natural gas, fertilisers and electricity. According to Mr P Chidambaram, Union Minister

for Finance, Government of India, the Cabinet Committee on Investments (CCI) has approved the speedy execution of 36 infrastructure projects entailing investments of Rs 1,830 billion (US$ 29.28 billion) to boost investor confidence.

12.0 12.0

GDP GROWTH BEATS EXPECTATIONS IN Q3

Current Economic Scenario

INDIA GDP Annual Growth Rate (Percent Change in Gross Domestic Products)

2012 2012 2013

5.3

6.1

2012 2013 20134.2

4.4

4.6

4.8

5

5.2

5.4

5.6

In the third quarter of 2013, the Indian economy advanced 4.8 percent over last year and was up from 4.4 percent in the previous quarter. This growth was led by a surge in agriculture production and construction. Agricultural production increased 4.6 percent YoY. Production of coarse cereals, pulses and oilseeds are expected to grow by 4.9 percent, 1.9 percent and 14.9 percent respectively during the Kharif season of 2013-14 compared with a year ago. Construction output accelerated to 4.3 percent, up from 2.8 percent in the previous quarter.

Mining shrank for the second straight quarter (-0.4 percent), although at a slower pace than in the previous three-month

period (-2.8 percent). Manufacturing recovered from previous quarter’s contraction and grew 1 percent.

Activities in finance, insurance, real estate and business services recorded the highest growth rate (10 percent YoY), followed by production of electricity, gas and water supply (7.7 percent YoY).

Although third quarter figures came above market expectations, the economy grew below 5 percent for the fourth straight quarter.

SOURCE: WWW.TRADINGECONOMICS.COM | MINISTRY OF STATISTICS AND PROGRAMME IMPLEMENTATION (MOSPI)

WHOLESALE PRICE INDEX RISES TO 14-MONTH HIGH IN NOVEMBER, 2013

5.65

7.31 7.28

4.5

5

5.5

6

6.5

7

SOURCE: WWW.TRADINGECONOMICS.COM | OFFICE OF THE ECONOMIC ADVISOR, INDIA

7.5

4.58

Apr/13 Jul/13 Oct/13

2

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

2012 2013

5.4

5.2

4.74.8

4.4

4.8

8

Jan/14

INDIA WHOLSALE PRICE INDEX CHANGE

4.774.58

5.16

5.856.1

6.46

7.24

7.52

6.16

5.05

4

10

15

20 -400

-600

-800

-1000

-1200

Average input costs rose in January, with manufacturers reporting higher prices for a range of raw materials, including metals, chemicals and energy. The rate of cost inflation remained robust. Consequently, companies raised their tariffs again. Although the strongest in three months, the latest rise in output charges was moderate and much weaker than seen for input costs.

Comment

Commenting on the India Manufacturing PMI™ survey, Leif Eskesen, Chief Economist for India & ASEAN at HSBC said:

"Manufacturing activity moved into higher gear led my faster growth in new orders. However, inflation pressures also firmed, suggesting that the RBI has to keep up its inflation guards.”

Key points

PMI up from 50.7 to 51.4 in January

Output expands solidly, as new order growth accelerates

New export business increases at quickest pace since June 2013


HSBC India Manufacturing PMI50 = no change on previous month, S. Adj.



60

55

50

45

402006 2007 2008 2009 2010 2011 2012 20132005

65

Manufacturing operating conditions improve at strongest pace in ten months

Summary

Indian manufacturers signalled a further improvement in operating conditions during January. The headline HSBC India Purchasing Managers’ Index™ (PMI™) posted 51.4, up from 50.7 in December. The latest reading was the highest since March 2013, but pointed to a marginal pace of expansion that was well below the series average (55.1).

January saw new orders expand at the quickest rate in ten months, with survey participants reporting stronger demand from both domestic and overseas clients. Concurrently, new business from abroad grew at a solid pace that was the fastest since June last year. Subsequently, Indian manufacturers raised their production levels for the third successive month. The rate of output growth was solid and the strongest since February 2013.

Sector data indicated that consumer goods continued to outperform the remaining two monitored categories, while operating conditions deteriorated at capital goods producers. Growth rates for output and new orders in the consumer goods sub-category surpassed those seen at intermediate goods companies.

Employment rose for the fourth month running in January, with all three broad areas of the manufacturing economy posting job creation. Despite being slight, the overall rate of expansion was broadly in line with the long-run series average.

Companies operating in the Indian manufacturing sector signalled pressure on operating capacity in January, as backlogs of work increased solidly. Moreover, the latest increase in unfinished work was the eighteenth in as many months. All three market groups posted higher work-in-hand, with the sharpest increase noted at consumer goods firms. Meanwhile, supplier performance improved in the latest month for the first time since September 2013. Anecdotal evidence suggested that shorter delivery times reflected a greater availability of raw materials at vendors.

Amid reports of new business gains, purchasing activity in the Indian manufacturing economy rose at the start of 2014, although the pace of expansion was only slight and well below the series average. Growth of buying activity was largely centred on the consumer goods sub-sector. Pre-production stocks increased at consumer goods producers, but fell at both capital and intermediate goods firms. This resulted in an overall decline of stocks of purchases across the Indian manufacturing economy as a whole.

Historical Overview

6

MONTH

Big*Businesses

MediumBusinesses

MONTH

SmallBusinesses

MicroBusinesses

46.947.2

47.5

47.447.5

48.0

50.550.350.5

49.248.148.3

Apr-June 2013 July-Sept 2013 Oct-Dec 2013

BCI bySectorBusiness sentimentimproved in lightindustry, very slightlyin services and heavyengineering


50.8 Services

Light Industry

Heavy Industry

48.2

46.6

50.1

46.8

47.4

50.3

48.1

47.6

*Big Businesses: Turnover > `500 crore Medium Businesses: Turnover `100-500 croreSmall Businesses: Turnover `5-100 crore Micro Businesses: Turnover < `5 crore


BCI BY SIZE

Business confidence index on the scale of 100

8

MODEST EXPECTATIONSMost companies expect little improvement in the January-March quater

Substantially Worse

Moderately Better

Moderately Worse

Same/No Change


47

93

Overall Economic Situation

Same as before

Same/No Change

ModeratelyBetter

Substantially Better Substantially Worse

Moderately Worse

11 9 3

Overall Economic ProspectsLess than 15 percent expect the situation to get better

77

2

75

.......................................... ..................................................

......................................................................................................................................................................................................................................

Overall Business Situation The Majority expect no change

3 10 74 11 2


Moderately Better

Same/No Change

Moderately Worse

Substantially Worse

................

........ ................

........

................

.................. ................

..................

Overall Financial SituationA small section expectsimprovement

76Same/

No Change11Moderately Worse

Moderately Better


Substantially Worse

......................................................................................................................................................................................................................................

1..........................................................

..................................................

84


......................................................................................................................................................................................................................................

10

Export PickupOver one-fourth expect exports to increase

Substantially Worse

Moderately Worse

Same/No Change

Moderately Better


1

765

252

Hiring PickupThe majority expectsno increase in hiring

7015

113

1

Import PickupOne fifth expects noimports to fall

Subs

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73 Same/No Change

6164

1Substantially

Better

Moderately Better

Substantially Worse

Moderately Worse

......

......

......

......

........

......

......

....

...... .....

..........

Stock pricesNearly 40 percentfeel stock priceswill rise

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Will the RBI’s unchanged monetarystance impact your business in thenext quarter?

Figures indicate percentage of respondents.

......................................................................................................

..........................................................................................................................

3169

NO

YES

34

.................................................................................................................................................................................................................................................

17

53

5

12

PRICE TREND OF STEEL FOR ARMOURING

Sep, 13Mar, 13 May, 13 Jan, 14

57000

58000

59000

60000

Jan, 13 Jul, 13 Nov, 13

61000

62000

63000

64000

Round 1.4mm dia Round 1.6mm dia Flat 4mm x 0.8mm

ALUMINIUM: (Al) EC grade Aluminium rods (Rs./MT)

4.58


135000

140000

145000

150000

155000

160000

PRICE TREND OF PVC COMPOUND


Grade CW-22

105000

100000

150000

120000

125000

130000

Jan, 13 Jul, 13 Nov, 13

Grade HR-11


55000

56000

14

May, 1125,000

Sep, 13

21,988

322843

Minimum compressive strength of their product.

Graphical sheet of compressive strength of respective grade for last six months.

Maximum monthly capacity to deliver in specified months.

•

•

•

Mode of transportation was defined into ‘Bag’ & ‘Bulker’ as per client’s usage and infrastructure availability at client premises.

transportation were discussed and resolved with participating bidders.

Payment terms were modified as per standard industry practices applicable for Cement i.e. from ‘Credit term’ of payment to ‘Immediate due net’, which resulted in increased bidder participation.

To address the challenge of cartelization amongst participating bidders market segmentation and order division clauses were tactfully implemented. Also a clear message was sent to participating bidders through client that no offline negotiation will be entertained and price discovered through mjunction platform would be final for order placement for this high value buy.

Auction Strategy

•

•

Training regarding bidding process was given to respective nodal person of each branch of participating company.

The event was timed & strategized such that client gets the best benefit of pricing.

Auction Activity

•

•

Benefits

buyjunction was able to achieve savings of 10.89% (Rs. 9.71 Crores) from the Start Bid Prices & 19.55% (Rs. 19.30 Crores) from L1 of Sealed Bid Prices for the Client.

buyjunctionwas successful in meeting client’s expectations and prime manufacturers of cement industry came on board and participated in the online event by agreeing to the techno-commercial clauses.

•

•

FINAL DERIVED PRICE

START BIDL1 OF SEALED BID700000000

750000000

800000000

850000000

900000000

950000000

Pre-Auction Activity

During techno-commercial scrutiny of bidders, keeping in mind the high volume of requirement and client’s requirement that cement manufacturers who can comply with supply of cement of 55 MPA and above, capacity assessment of participating bidders was done and they were asked to furnish following credentials:-

Our ApproachPeople operating from different branches of a single company were tagged branch-wise by operations team of buyjunction for individual markets pertaining to their location. Branch wise login id and password were given to them.

•

Buyjunction Case Studies

A few TATA group companies mandated buyjunction for the procurement of aggregated volume of 176102 MT of Portland Slag Cement. The supplies were to be made between Jan 2014 and June 2014.

Business Challenges

Cement as a commodity is driven by high degree of cartelization, manufacturers prefer offline negotiations

The geographic spread of the procurment was large and Cement companies usually operate from separate branches where the nodal persons are different for different locations.

•

and prices are buffered accordingly. The main challenge for buyjunction was bringing in primary cement manufacturers on board for online price negotiation as the client was not interested in participation by secondary players.

•

The requirement was for 30 locations across TATA group of companies in eastern part of India. To accomplish best prices without affecting locational preferences, the total requirement was segmented into 9 Markets.

Freight load structuring was kept in mind while framing the markets for better participation and price realization.

For achieving maximum benefit from supplies, tax implications for both ‘plant-route’ and ‘depot-route’

•

•

•

PRICE TREND FROM SEALED BID TO FINAL PRICE

SAVINGS OF 10.89%

April, 2014issue 6

1



Ghosh, Atanu Saha




Editor:







Credits





Regards,


Index3

5

11

13

15


3







60

55

50

45

402006 2007 2008 2009 2010 2011 2012


40

2013

65


Summary








Comment



Key points




Historical Overview

5

-400

-600

-800

-1000

-1200














52.453.8 54.5

48.7

48.248.6

Apr-Jun 2013

July-Sept 2012


Jul-Sep 2013

Oct-Dec 2013



A MINOR REBOUND

7




Moderately Worse


Moderately Better

Same/No Change

3


13

10

72

40

2005 2006 2007 2008


9


Moderately Better

6

Substantially Worse

Moderately Worse

Same/No Change

68 15 2



Substantially Worse

ModeratelyWorse

Same/No Change


116

1

64

53.8


70Same/No Change


Substantially Worse

Moderately Better

Moderately Worse

14

10

3

3

...................

..........................

....................

..........................

..........................


74Same/

No Change


12 ModeratelyBetter

11

ModeratelyWorse

Substantially Worse

..........................................................................................................................................................................................................

..........................................................................................................................................................................................................................

.........................................................................................................................................................................................................................


1

9



Same/No Change

Moderately Worse

Moderately Better

Substantially Worse

14

56

18

6

6

Subs

tant

ially

Wor

se

Mod

erat

ely

Wor

se

Subs

tant

ially

Bette

r

Mod

erat

ely

Bette

r

Sam

e/N

o C

hang

e

6


3

66

21

4


80

Subs

tant

ially

Wor

se

Mod

erat

ely

Wor

se

Subs

tant

ially

Bette

r

Mod

erat

ely

Bette

r

Sam

e/N

o C

hang

e

............................................................................................................................

Subs

tant

ially

Wor

se

Mod

erat

ely

Wor

se

Subs

tant

ially

Bette

r

Mod

erat

ely

Bette

r

Sam

e/N

o C

hang

e


6 7 64 18 5

............................................................................................................................


75

Moderately Better11

15

Same/NoChange

............................................................................................................................

10

32

Moderately Worse


Substantially Worse

............................................................................................................................................................................................................................................................................................................

3359

11




Cables

Introduction:








Major Cost Drivers:



(ii) PVC compound



4.58


400000

420000

440000

460000

480000

500000

520000

MRO

Packaging

Project

Refractories

Steel


13

90.39

1.28

456.47

132.78

1.95

11%

1%

8%

11%

1%




PR Value (Rs. Lakhs) 1108.6 1026.3 9230.8







Electrical

Ferro-Alloys

Logistics

218.72

48.54

14.61

216.99

7.31

6%

11%

12%

3%

12%



15

















3. Tata Projects











Tel: +91 33 6610 6100, 2288 2606 Fax: +91 33 2288 2078


16




Ghosh, Atanu Saha




Editor:




12.0 12.0




2012 2012 2013

5.3

6.1

2012 2013 20134.2

4.4

4.6

4.8

5

5.2

5.4

5.6








5.65

7.31 7.28

4.5

5

5.5

6

6.5

7


7.5

4.58


2

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

2012 2013

5.4

5.2

4.74.8

4.4

4.8

8

Jan/14


4.774.58

5.16

5.856.1

6.46

7.24

7.52

6.16

5.05

4

10

15

20 -400

-600

-800

-1000

-1200


Comment



Key points








60

55

50

45

402006 2007 2008 2009 2010 2011 2012 20132005

65


Summary







Historical Overview

6

MONTH

Big*Businesses

MediumBusinesses

MONTH

SmallBusinesses

MicroBusinesses

46.947.2

47.5

47.447.5

48.0

50.550.350.5

49.248.148.3




50.8 Services

Light Industry

Heavy Industry

48.2

46.6

50.1

46.8

47.4

50.3

48.1

47.6



BCI BY SIZE


8


Substantially Worse

Moderately Better

Moderately Worse

Same/No Change


47

93


Same as before

Same/No Change

ModeratelyBetter


Moderately Worse

11 9 3


77

2

75

.......................................... ..................................................

......................................................................................................................................................................................................................................


3 10 74 11 2


Moderately Better

Same/No Change

Moderately Worse

Substantially Worse

................

........ ................

........

................

.................. ................

..................


76Same/


Moderately Better


Substantially Worse

......................................................................................................................................................................................................................................

1..........................................................

..................................................

84


......................................................................................................................................................................................................................................

10


Substantially Worse

Moderately Worse

Same/No Change

Moderately Better


1

765

252


7015

113

1


Subs

tant

ially

Wor

se

Mod

erat

ely

Wor

se

Subs

tant

ially

Bette

r

Mod

erat

ely

Bette

r

Sam

e/N

o C

hang

e

73 Same/No Change

6164

1Substantially

Better

Moderately Better

Substantially Worse

Moderately Worse

......

......

......

......

........

......

......

....

...... .....

..........


Subs

tant

ially

Wor

se

Mod

erat

ely

Wor

se

Subs

tant

ially

Bette

r

Mod

erat

ely

Bette

r

Sam

e/N

o C

hang

e



......................................................................................................

..........................................................................................................................

3169

NO

YES

34

.................................................................................................................................................................................................................................................

17

53

5

12



57000

58000

59000

60000

Jan, 13 Jul, 13 Nov, 13

61000

62000

63000

64000



4.58


135000

140000

145000

150000

155000

160000



Grade CW-22

105000

100000

150000

120000

125000

130000

Jan, 13 Jul, 13 Nov, 13

Grade HR-11


55000

56000

14

May, 1125,000

Sep, 13

21,988

322843




•

•

•





Auction Strategy

•

•



Auction Activity

•

•

Benefits



•

•

FINAL DERIVED PRICE


750000000

800000000

850000000

900000000

950000000




•



Business Challenges



•


•




•

•

•


SAVINGS OF 10.89%