Micromax to invest Rs2,000 crore in manufacturing over next 5-6 years
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Hyderabad: Micromax Informatics Ltd., the biggest homegrown mobile phone brand, will invest Rs.2,000 crore over the next 5-6 years to develop manufacturing facilities and establish a mobile phone ecosystem in India.
Micromax plans to graduate from assembling mobile handsets, tablet devices and LED televisions to manufacturing spares and accessories for its entire range of products, and eventually making high-precision components that go into the devices.
The company’s growth plans will be fueled by money from its cash reserves. It can also raise additional funds by approaching private equity investors or by listing on the bourses, Rajesh Agarwal, co-founder of Micromax, said. The company’s four promoters hold 80% between them.
Micromax is a profitable company with Rs.12,000 crore of revenue during 2015-16, Agarwal said, without quantifying its profit. It expects revenue to grow 25% to Rs.15,000 crore during 2016-17.
The company is in discussions with makers of accessories such as batteries, chargers and earphones to set up units near Micromax’s Hyderabad plant. At the same time, Gurugram-based Micromax is also ready to collaborate with other companies to set up ancillary units around its 19-acre Hyderabad assembly plant.
“We are open to the idea of forming a JV (joint venture) with other players to bring in component ecosystem,” said Agarwal. Micromax’s second domestic unit with initial capacity to manufacture 1 million devices a month was opened in Hyderabad’s outskirts on Thursday. The plant was built with an initial investment of Rs.100 crore.
As the anchor unit for Fab City, a special economic zone for semiconductor companies in Hyderabad, Micromax plans to bring in component suppliers and accessory makers in the vicinity of its facility. The Telangana government recently rolled out a dedicated policy for the electronics sector to draw companies to the state.
“Partners are also keen to come to Telangana,” said Agarwal. “The ecosystem will come but it will take some time.”
Although Indian phone makers are taking baby steps in electronics manufacturing by setting up assembly lines where rows of workers put together different components to bring out the finished product, the domestic industry will gradually evolve, said Agarwal.
He likened the domestic electronics industry to the automobile industry in the 1980s when there was no ecosystem. Over the last three decades, the domestic automobile sector has become self-sustaining.
Full-fledged domestic electronics manufacturing, Agarwal said, will take place in four phases. The first phase of setting up assembly units is under way. Less complex components such as accessories (chargers and batteries) will be made locally in the next phase (from 2016-18) followed by high precision component manufacturing in the third phase (2019-21). In the final phase (2022-24), the world’s biggest fab companies will set up base in the country, he said.
Micromax’s manufacturing facilities are built and operated by its manufacturing arm Bhagwati Products Ltd. Apart from Hyderabad facility, Bhagwati runs the company’s first plant in Rudrapur, Uttarkhand. It is also building its third facility at Bhiwadi, Rajasthan (Rs.100 crore investment) and another at Bhopal in Madhya Pradesh.
Apart from mobile phones and televisions, the Hyderabad unit will also manufacture LED lights, the company said.