Teauction.com is the first digital B2B (Business to Business) exchange in the world set up for buying and selling of tea. Launched exactly a year ago, the portal has conducted over 24 auctions successfully on the internet. The portal is raring to go and has some ambitious plans on the anvil. Promoted by the Williamson Magor group, the Apeejay Surrendra group, Hanuman Tea and Centurion Bank -- this Kolkata-based e-commerce portal has already spread its wings to various other tea-producing countries by a series of tie-ups for specific auction floors. It is also working on a seamless online integration with various tea multinationals across the world. indiamarkets.com caught up with the company's Managing Director Ayush Bagla, the man behind the idea and Chief Executive Officer Rakesh Bhutoria for a tete-a-tete.

Excerpts from the interview:

indiamarkets: What prompted you to start this venture?
Bagla: My family had been dealing with the tea business since 1961. Of late, transaction costs in selling tea had increased and it used to take 8 weeks to sell any particular type of tea. Tea being a seasonal product, price fluctuations due to delay in warehousing and sampling of tea would result in decline in value of tea by 15 per cent to 20 per cent. We needed to speed things up and make it more efficient.

indiamarkets: How have you been able to address this problem through the web site?
Bagla: We have been able to compress the transaction time from 8 weeks to 1 week and this has saved immense costs. We have saved on inspection, withdrawal, interest and auction committee charges. The cost component is therefore Rs 4.40 per kg vis-a-vis Rs 6 per kg through conventional auction. Our endeavours are focussed towards reducing transaction time and cost by over 50 per cent.

indiamarkets: What is your buyers' profile?
Bagla: We have a large cross section of buyers doing business on our site — right from Williamson Magor, Jayshree Tea, Nestle, Tata Tea, Tetley, which does business through its Indian agents and the relatively unknown buyers from Gujarat. We have a well-diversified pool of buyers with 65 per cent to 70 per cent of them trading through our exchange.

indiamarkets: What are the kinds of volumes that you have been able to sell through the internet.
Bhutoria: Out of a total tea production of 820 million kgs in India, around 450 million is auctioned. Out of this our market share is 6 per cent of the total auctioned tea in the country. The trend is catching on.

indiamarkets: Are there any overseas initiative that you have taken vis-a-vis other tea producing and tea consuming countries?
Bhutoria: Currently, we are spreading to other tea-producing countries and we have been able to execute tie-ups with three out of eleven countries, for country specific auction floors on the web site. In Sri Lanka we have tied up with Forbes & Walker, the country's leading tea conglomerate with broking and plantation interests. Business should start in full-swing by the end of this month. In Bangladesh, we have tied up with Unity Tea for the same purpose. We are also talking to the Indonesian government for bringing Indonesian teas online. We will also be shortly getting into other countries like Kenya and the UK. We are waiting for the e-commerce laws to be put in place. At the moment, overseas buyers cannot buy directly through the web site. They can do so only through their Indian agents.

indiamarkets: What is your top priority in the agenda for e-commerce?
Bhutoria: At the moment we are working on a major revenue stream of having a seamless integration with global players and multinationals, who are the largest buyers of tea. (This would mean use of software tools to customise and design solutions specific to each customer's needs and provide the werewithal to carry it out on a turnkey basis. In other words, the website will provide an answer for each and every global operation requirement right from pricing of blends, logistics, transportation and sales tax issues. This could be done by integration with either te ERP of the MNC or the marketing division, or production, whatever may be convenient. In short, teauction.com will address all requirements of global sourcing operations thus saving them immense costs.) We are offering to fulfill all their requirements of global sourcing operations through us. Talks are at an advanced stage with each one of them, though we have to still decide whether such tie-ups will be fee-based or equity-based.

indiamarkets: What are your various sources of revenue for sustainability?
Bhutoria: We basically have five revenue streams. First, the transaction income on volume of throughput. Secondly, we provide access to trade financing to our members through Centurion Bank - one of our promoters. For this, we charge credit arrangement fees. The third is what we are working on -- seamless integration with multinationals, which should fetch us good money. We are already supplying such services on an individual basis, but the ultimate goal is to integrate. Fourth, each joint venture with an overseas partner is based on a revenue-sharing arrangement. Lastly, in the future, we plan to charge fees for specialised value-added services.

indiamarkets: Any other tie-ups?
Bhutoria: We have, about four months ago, concluded a tie-up with a US-based satellite imaging company to provide real time weather-related data for each and every tea estate in the country. There are around 3000 tea estates in the country. Buyers can get real time feeds on the weather forecast for the next four days so that they are able to price the product right. This is a much more scientific way of pricing than the former method of depending on hearsay.