Xiaomi Aims Big With The $10 Billion IPO: The Second Largest After Alibaba

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The Chinese OEM Xiaomi Corp. is about sheer business as the tech firm filed for an initial public offering (IPO) in Hong Kong on Thursday, in what is expected to be the world’s largest listing since 2014. Xiaomi didn’t disclose how much it plans to raise, but the expected amount is at least $10 billion. The listing could value the company around $100 billion and would be the world’s biggest IPO since Alibaba’s $25 billion debut in 2014.

The company reported its detailed financials for the first time, ahead of the anticipated IPO. The revenue of Xiaomi clocked 114.62 billion yuan ($18 billion) in 2017, up 67.5% from 2016. Operating profit rose sharply from 3.79 billion yuan in 2016 to 12.22 billion yuan last year. Despite rising sales, the company was hit by huge losses. It posted a net loss of 43.9 billion yuan ($6.9 Billion) in 2017, reversing from a profit of 491.6 million yuan a year earlier.

The tech firm is also expected to issue Chinese depository receipts (CDRs) after it goes public. China’s State Council has approved plans to introduce CDRs, however, timing and details are unclear. Lei Jun, Co-founder and CEO, said CDRs was “an excellent idea” and a “great policy innovation“.

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Xiaomi IPO: The First Step Of Global Expansion Plan

Xiaomi, in its deliberate move, is trying to pour huge investments and expand beyond borders. The company has a strong presence in China, Europe and other APAC countries, but it aspires to prevail in the U.S market where it struggles. Xiaomi has portrayed a consolidated image in the emerging markets and now it is looking forward to entering developed markets for smartphones. So far things are falling right on the bat for Xiaomi, last year it entered Spain and is also in talks with U.S carriers that’ll make it sell devices on Apple’s home turf.

The company suffered through some challenges in past years. In 2016 the company’s sales tanked to just 41 million from the reported 70 million in the previous year. The company faced supply chain as one of the biggest operational challenges to handle, which has a direct impact on the sales. The mounting supply chain problem forced the company to retreat from many overseas markets, including Indonesia and Brazil. The exclusive tie-ups with online stores held Xiaomi back from reaching many less tech-savvy customers in China. In India – the most promising market for Xiaomi – the intensified competition from the newbies, likes of Vivo, put the company on toes.

The company bounced back through its retail strategy. In India and China Xiaomi started expanding its offline presence. Xiaomi, which initially had an online presence, opened hundreds of retail stores and also its strong growth in the home market and India were major factors for its resurgence. Consequently, Xiaomi’s quarterly shipment share swell to 7.2% in Q4 2017 from just 3.3% in Q4 2016.

Xiaomi is a lot more than a smartphone company. It sells a variety of consumer electronics and IOT based gadgets. The wide spectrum of products includes air purifiers, rice cooker, wearables, electric scooter, Mi TV, Mi Drone and etc. Xiaomi said it registered a revenue of 23.5 billion yuan last year from its ecosystem.

Xiaomi has shown a transition that very few Chinese companies have reached. Xiaomi is now the no. 4 global smartphone maker and Huawei is third. With Huawei and ZTE facing troubles in the U.S, it is Xiaomi who can unveil China’s tech ambition to the world. Huawei and ZTE were accused of posing a threat to America’s national security. Very recently, Pentagon banned the sale of ZTE and Huawei mobiles on U.S military bases.

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Bottom line is that Xiaomi seems ambitious enough to disrupt the global market and dreams that its future endeavours could match Apple-level of success in America, but the company has a long way to go to reach the pinnacle.

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