SoftBank Eyes On Micromax: To Buy 20% Stake At $5 Billion Valuation


After grabbing a lion’s share of Indian eCommerce industry, SoftBank Corp is once again ready to inject more funds, but this time with a bit different approach. According to the latest reports, a SoftBank led group of investors are in talks to buy 20 percent stake in India’s leading mobile devices manufacturing company Micromax Informatics. The group has reportedly valued Micromax worth $5 billion and will make an investment of $1 billion that will help Micromax to strengthen its market presence further.

The development is being considered as the much-needed boost for local mobile devices manufacturers. In the last few years, growth of local mobile manufacturers has slowed down with the advent of Chinese companies, likes of Xiaomi and Gionee, into the Indian mobile market – world’s fastest growing mobile market. These Chinese manufacturers are keeping their competitors, including Samsung and Micromax, in check by offering the devices at insanely low price. This has forced other companies to squeeze their margins, either to keep their growth rate intact or save the existing market.

India is the fastest growing mobile market in the world. With more than 1.25 billion population and 930 million mobile subscriptions, India is the most promising market for foreign investors – thanks to the self-confined ecosystem of China. By the end of 2014, 199.6 million units of smartphones were shipped in India and the market is expected to grow at much faster rate in 2015 due to the introduction of low-priced, yet power-packed, entry-level smartphones from Xiaomi, Lenovo and Micromax.

The cutthroat competition has forced Indian mobile manufacturers to seek more funds. According to few earlier reports, founders and existing investors of Micromax were exploring the possibility of outright sales of the business, provided the valuation expectations are met. Micromax was reportedly in talks with eCommerce giant Alibaba to offload some of its equity to raise funds to fuel its operations. The Indian smartphone major was being advised by Goldman Sachs on all such possibilities.

In 2010, Micromax had tried to go public but later shelved those plans citing unfavorable market conditions. According to the sources, the company will go for US listing in the next few years after raising some more funds at a much higher valuation. This will help investors gain multi-folds returns on their investment in the company.

In Q4, 2014 Micromax leapfrogged South Korean mobile giant Samsung to take the lead position in the India smartphone market. Samsung challenged these figures though; but Micromax has presented an impressive quarter-on-quarter growth by selling 12.5 million units of smartphones in 2014 and narrowed the gap with Samsung who sold 17.1 million smartphone devices during the same period. While Samsung is revamping its strategy to maintain the lead in the price sensitive market, Micromax is facing a fierce competition from the new entrant – Xiaomi.

In the FY14, Micromax made a profit of $47 million on total income of $1.1 billion, according to the Registrar of Companies (RoC) filings.

SoftBank Corp has been bullish about the eCommerce growth in India. In 2014, the company invested nearly $1 billion – a 25% of total funding in India. This year, SoftBank Corp has set a lofty goal to invest $10 billion in the country’s e-commerce and mobile market.

We tried to reach out Manish Tuli, Co-founder of Micromax Informatics, but we are yet to receive any response from him. SoftBank has denied commenting on the development seeking confidentiality of the matter.

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