Infibeam plucks GeM Deal from under Flipkart-Amazon’s nose

#DigitalErra
Jul 27, 2017 · 4 min read

Fintech startup Intellect Design Arena and e-commerce major Infibeam have won the bid for government emarketplace (GeM). Both entities have reportedly emerged as the lowest bidders to run the online platform.

#DigitalErra Thought Corner

For a five-year contract, Intellect will manage the operations. Being a part of the consortium, Infibeam will provide its expertise in e-commerce services while Tata Communications will offer its cloud services.

While Intellect beat TCS and Sify, Infibeam won the bid over players like Flipkart and Amazon. As per reports, TCS roped in Tata Group ecommerce firm Tata CLiQ and Sify partnered with Amazon Web Services to form a stronger consortium.

The government of India was looking for a technology firm to run the government e-marketplace (GeM) from where it purchases goods and services. Large MNCs like Tata Consultancy Services, Sify and ecommerce majors like Flipkart and Amazon were in the race to bag this contract. The government is set to make the use of GeM mandatory for all its departments, as per reports in February 2017. The five-year contract is estimated to be worth around $155 Mn (INR 1,000 Cr), sources in the know said.

What’s In For The Winners

Procurement by the central and state governments has been estimated to be worth around INR 5 Lakh Cr-INR 7 Lakh Cr each year.

As mentioned on the official government GeM portal — 3282 buyers, 7982 sellers and 942 service providers — have already been associated with GeM. It currently offers products in over 268 categories including automobiles, agricultural machinery, bathroom accessories, computers and accessories, pest control devices, personal communication devices and more. On the services front, 17 sectors have been added such as laundry, pest control, child care, security, transport, florist, third party inspection and more.

Earlier, the bidders pursuing the contract had a chance to get around 0.5% of the total transaction value on the portal as commission. However, as per the ET report, the winning consortium has bid much lower than this.

A Mumbai-based firm Nextenders who had been roped in to manage e-bidding for the platform quoted to ET, “Smaller companies can be extremely flexible and they agree with prices and specifications that larger firms can usually not match.”

About GeM

The government emarketplace was launched in August 2016 to facilitate the online purchase of goods and services for the employees of Central Government ministries and departments. The portal has been developed by the Directorate General of Supplies and Disposals (DGS&D) with technical support of NeGD (MeitY).

The aim is “to transform the way in which procurement of goods and services is done by the Government Ministries/Departments, PSUs, autonomous bodies etc.,” according to an official statement released by the government in January 2017.

As claimed by the government, the average prices on GeM are lower by at least 15%-20% and, in some cases, even up to 56%. GeM is also in charge of demand aggregation for items that are to be procured by various Central/State Government Departments, which is estimated to result in annual savings to the tune of $6.2 Bn (INR 40,000 Cr) per annum.

All the documents on GeM are e-signed at various stages by the buyers and sellers. The antecedents of the suppliers have verified online automatically through MCA21, Aadhar, and PAN databases. In addition, SEBI-empanelled credit rating agencies are also being used for conducting a third-party assessment of suppliers. Also, for high-value bids/RA (risk assessment) on GeM, an e-bank guarantee is also being introduced.

“If pursued to its logical conclusion, GeM would eventually emerge as the National Public Procurement Portal (NPPP), keeping in tune with the global best practices. Most of the OECD (Organisation for Economic Co-operation and Development) member countries, like the US, South Korea, UK, Singapore etc., have a single NPPP and as a result annual savings of billions of dollars are made in public procurement, besides giving a fillip to the domestic industry,” was stated in an official statement.

Conclusion

Infibeam has emerged as the dark horse to win the bid at a time when it’s also been named as a potential candidate for Snapdeal merger. In May, Infibeam Incorporation Ltd, the parent of online marketplace Infibeam and e-commerce enabler BuildaBazaar, had reported a net profit of Rs 13.6 crore for the fourth quarter ended 31 March 2017, up 489% from Rs 2.3 crore in the same quarter last year, a rare sight for an ecommerce firm. It’s going to be a multibillion dollar opportunity for Infibeam and Intellect to work from here.

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