Micromax may sell one-fourth stake to Alibaba
Micromax is in talks with China's Alibaba Group to sell one-fourth of its stake for $700 million (Rs. 4,200 crore). The deal that involves sale of 20-26% stake to Alibaba may also include the participation of Japan's SoftBank. SoftBank has a 32% stake in Alibaba. Both SoftBank and Alibaba are looking to invest jointly in Micromax by means of a commingled (mixed) fund.
Micromax was founded in 2000 as an IT software company that worked on embedded platforms. Rahul Sharma, Rajesh Agarwal, Sumeet Kumar and Vikas Jain are the four founders of Micromax. Headquartered in Gurgaon, the company entered the mobile phone market in 2008. Initially, it positioned itself as a low cost mobile provider targeting rural masses.
After phones for the rural market, Micromax moved towards the urban market by selling mobiles with features appealing to urban consumers . 'We wanted to approach the market by first going to rural and semi-urban areas and then targeting the big cities', said Vikas Jain. By March 2010, Micromax secured a 6% market share, making it the third largest mobile phone vendor in India.
Micromax launched its first phone with a month-long battery back-up known as X1i. X1i, was born from the realisation that many Indian villages and towns didn't get enough electricity to even charge a phone daily.
Micromax sold a 10% stake in the company to three private equity firms - Sequoia Capital, Sandstone Capital LLC and Madison India Capital for Rs.200 crore. This was in addition to the Rs.225 crore it raised from TA Associates, by selling a little less than 20% stake in late 2009. With additional capital infused, Micromax proved to be an emerging threat to market leaders.
Micromax announced its entry into the Russian market with the launch of Canvas and Bolt range of mobiles. With this it became the first Indian mobile company to launch in Russia. The company said it will launch 14 products in the initial phase and then move on to Europe. Micromax has succeeded in becoming India's second biggest Android-phone maker just behind Samsung.
India is the world's third-largest smartphone market and Micromax became the largest smartphone seller in the country, overtaking Samsung. As of the quarter ending 2014, Micromax accounted for 22% of the market share ahead of the Korean giant which had 20%. The success of Micromax lies in their low priced - innovation driven strategy aimed at the rising mid-level income group in India.
If done, the Micromax deal will give Jack Ma's Alibaba an entry into one of the world's fastest growing handset markets. It would be able to roll out services such as Alipay - its online payments platform on Micromax phones.