Mumbai: Indian mobile handset maker Micromax Informatics Ltd is challenging Samsung India Electronics Pvt. Ltd and LG Electronics India Pvt. Ltd as one of the top three sellers of cellular phones in the country, overtaking rivals such as Motorola Inc. and Sony Ericsson Mobile Communications AB and prompting it to look overseas to expand sales.
The Gurgaon-based firm, which entered the business about two years ago, sold about 1 million handsets in January, up from 700,000 in December.
The surge would have vaulted the company up the rankings, said Vikas Jain, one of the four founders of the relatively little-known Micromax.
Market research firm IDC’s “numbers for the December quarter or January are not available yet, but according to our sales numbers it’s safe to assume that we are at the third spot”, said Jain, who set up the company in 1990s along with three friends from engineering college—Rahul Sharma, Rajesh Agarwal and Sumeet Kumar, all of whom are in their mid-30s to early 40s.
Citigroup Global Markets Inc. confirmed Jain’s assertion in a 3 February report, in which analysts Rahul Singh and Gaurav Malhotra said Micromax had a 10% market share, putting it at No. 3 behind Nokia Oyj and Samsung, which had 12-13%. The analysts were prompted to write about the unlisted firm after being surprised by the brand’s presence across rural markets, they said.
Game changer: A mobile phone shop in Faridabad. After capturing the rural market, Micromax is now focusing on the urban pie.
The success of Micromax prompted US private equity group TA Associates to buy “less than 20%” of the firm for around $45 million (Rs210 crore today) in December, valuing it above $225 million and indicating confidence in its growth potential. Jain estimated that the firm will close the fiscal with sales at around Rs1,500 crore.
Of the 100 million handsets sold in the year to June 2009, according to the latest IDC data, Nokia was the market leader with a share of about 56%. Samsung and LG were at second and third respectively, with 7.7% and 5.4%.
India’s mobile phone market has been dominated by overseas brands such as Nokia and the two South Korean firms, making Micromax one of the first home-grown ventures to make a dent in the handset market as well as the wider consumer electronics sector.
Micromax wants to move up a spot in the two months left in the fiscal. “The No. 2 spot has always been a slippery one in India,” Jain said. “We have seen Sony Ericsson, Motorola, and now Samsung, which is under threat.”
The entry of new players is serving to fuel growth in the market, according to Samsung, which will depend on core strengths to defend its position.
“As far as Samsung is concerned, we are relying on product innovation, superior product quality backed by the reassurance of Samsung service and an enhanced channel penetration to drive our growth,” Ranjit Yadav, director (mobile and IT) at Samsung India, said in an emailed note.
LG’s spokesman was not available for comment.
Micromax, started operations in 1991 as an embedded software design firm, but was incorporated as a company in 1998, when it branched out as a distributor of computer peripherals such as printers, monitors, scanners from manufacturers such as LG, Sony Inc., Dell Corp.
“We hope to be present in at least one country each in Latin America, Middle East and Africa before the end of the financial year,” Jain said. The firm has identified Brazil, Nigeria and Dubai as target markets.
Micromax specialized in entry-level and mid-segment handsets priced between Rs1,800 and Rs2,400 when it started selling the devices in 2008, confining itself to small towns and rural areas in the first 12-18 months. Encouraged by its success, the firm expanded to larger cities and now has a distribution network of 55,000 retailers, which it plans to scale up to 70,000 by the end of March as part of its strategy to raise sales to 1.5 million handsets a month.
Micromax is planning to expand its range in keeping with new market demands. It is readying several high-end handsets, including phones that will run on Google’s Android and Microsoft’s Windows Mobile operating systems. The handsets are expected to be available in “April or May”, Jain said
Having gained traction, Micromax is also working on a strategy to create awareness in the metros, which includes tying up with MTV for co-branded phones.
“Once you have established a good distributor network and sales are robust, the next logical step is branding exercises to ensure consistent brand re-call among your target consumer base,” said Romal Shetty, executive director and head telecom practice at audit and consulting firm KPMG India.
Micromax has also tied up with a Bollywood celebrity “who will be announced shortly” as brand ambassador, Jain said. Bollywood star Aamir Khan endorses Samsung phones.
The Micromax phones are designed by the in-house research and development team, as is the embedded software. The on-board chips come from MediaTek Inc., Qualcomm Inc. and Infineon Technologies AG—the last two also count Nokia as a client. Manufacturing is outsourced to about 11 factories in Taiwan, South Korea and China.
Micromax has invested Rs100 crore to set up a plant in Baddi in Himachal Pradesh as it feels outsourcing manufacturing completely leaves the door open for supply-side uncertainties. Production will be scaled up from an initial 50,000 per month.
“If everything goes right, by the third phase in March 2011, the Baddi plant will be making about 500,000 handsets,” Jain said. If the plant isn’t able to cope with the numbers, the fallback plan is to acquire a facility in South Korea, Taiwan or China, he added.
Nokia has a plant in Chennai, established in 2006 at a cost of around $150 million, from where it also exports.