Alibaba is in talks with Micromax for stake sale


alibaba-group-logoAlibaba is in talks with Micromax for stake sale. China’s leading online retailer Alibaba Group Holding Ltd along with consortium of investors includes Ant Financial which owns the payment platform Alipay, is in talks with Micromax Informatics, makers of Micromax for significant stake. The deal is tipped worth to be $1 billion.

Once the deal is through with legal authorities, Alibaba will invest $500 – $600 million of fresh capital in Micromax. Remaining $400 million will be from secondary market where Alibaba will take over from existing investors like Sequoia Capital and others.

Alibaba plans to push their services and operating software through Micromax devices. This would be second big investment in the country by the Chinese major Alibaba after its payment company Alipay Singapore E Commerce P Ltd picked up a stake in PayTM in February 2015. Alibaba has developed its own operating system called Aliyun, plans to push the technology through Micromax in India.

Alibaba OfficialOn the other hand Micromax is India’s largest smartphone maker pipped Samsung from the top position recently. Although Micromax is in talks with several financial institutions and strategic investors like SoftBank Corp with whom the talks fell through at the last minute due to the valuation difference.

Most of the phone manufacturers always look out for ways to generate revenue through their mobile applications, software and other bundled products for better margins. With this deal Micromax will be able strengthen its services business and assists in expansion to several untapped markets.

Smartphone market in India is witnessing major war that could be further fuelled. Chinese smartphone market Xiaomi is making ways and with their cutting edge technology has made inroads in India. Xiaomi aggressively positioned itself in the market and has brought Ratan Tata, Chairman Emeritus of Tata Group, as an investor. Xiaomi has charted into league of top 5 among smartphone makers.

Micromax which had humble beginning started their journey with low priced, features filled smartphones that had dual SIM slots, QWERTY keypads, and budget priced quad core smartphones. They integrate local language in their smartphones. These innovations made them one of world’s fastest growing mobile handset markets in the world.

After 5 years of launch, Micromax has overtaken global brands Nokia and Apple. The company overtook market leader Samsung earlier this year. Micromax is exporting their smartphones to Russia and some countries in South Asia. The company has grand plans to launch their products in several countries soon.

Gurgaon based Micromax generated INR 10,000 crores revenue for the last financial year ended 31st March 2015. The company foresees an increase in sales by 50% for the current fiscal. Micromax has entered several strategic partnerships with companies. Yesterday they entered into partnerships with mobile travel search firm Ixigo to strengthen its presence in applications services.

micromax-canvas-2-colors-a120Micromax has already set up mergers and acquisitions desk, actively works with start ups across major technology markets like the US, Europe and Israel to bring the best product portfolio to India.

Industry observers like Merisis, an investment bank founder Sumir Verma says “With Alibaba on its side, Micromax has now the capability of becoming a strong global brand”. Micromax was founded by Rahul Sharma, Vikas Jain, Sumeet Arora and Rajesh Agarwal in 2008. They control 80% stake in the company. Remaining 20% is held by TA Associates, Sequoia Capital, Sandstone Capital and Madison India Capital.

Micromax will officially issue statement on the stake sale to Alibaba once the legalities are over which are in the process and might have reached final stages. Alibaba and Foxconn Technology is in talks with the promoters of Snapdeal, signalling the entry of Chinese major into the Indian market.