BackMicromax plans to raise funds to fend off Samsung
Micromax expects to hit $2 billion in sales in the fiscal year, says CEO Vineet Taneja
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New Delhi: Micromax Informatics Ltd, the Indian smartphone maker threatening Samsung Electronics Co. Ltd’s lead in the world’s second-largest market, plans to raise more capital to help it break away from foreign rivals.
The company is considering outside investment to develop locally focused software to complement mobile phones already available in 21 local languages, chief executive officer Vineet Taneja said. Micromax expects to hit $2 billion in sales in the fiscal year that ends this month, Taneja said, up from $1.2 billion last year.
“It will be critical to differentiate ourselves through something beyond the hardware," Taneja said in interview at the company’s New Delhi headquarters. “The Internet services space does require money because it requires investment, new capabilities and strategic partnerships."
The closely held company became one of India’s top two smartphone vendors by offering affordable devices tailored to a market where carriers typically don’t subsidize phones and dozens of languages are spoken. The company plans to fend off competition from rivals such Xiaomi Corp. by developing made-in-India applications that deliver services sought by local consumers.
Beijing-based Xiaomi—the world’s most valuable startup—started making software for mobile devices before expanding into smartphones, TV set-top boxes and connected devices.
Development staff
While Micromax has an advantage in India’s smartphone market, it is playing catch-up in software development, said Neil Shah, director at Counterpoint Technology Market Research.
“What Xiaomi has been doing in China, Micromax is trying to do in India," Shah said by phone from Mumbai. “It’s a good plan as long as they have good funding because building a good ecosystem and services, it’s a very tough nut to crack."
Taneja, 50, joined Micromax in June after heading Samsung India’s mobile division. With his salt-and-pepper hair, buttoned-down shirt and khakis, the chief executive stands out among the mostly young, T-shirted workers at Micromax’s headquarters.
While he wouldn’t say how much outside funding the company might seek, he said an initial public offering wasn’t necessary. In 2011, Micromax withdrew a 4.68 billion rupee ($75 million) share sale that would’ve valued the company at about $1 billion. Back then, the company reported less than a quarter of the sales it forecasts now.
‘Very close’
Micromax plans to hire “hundreds" of developers to supplement its existing game line-up and app store, Taneja said. New software might, for example, aggregate online shopping services.
“At some stage, we will need to raise money," Taneja said. The company’s “plans will become big because we’re really serious about this mobile Internet services space," he said. “Funding will become an obvious way to go."
Samsung and Micromax are in a tussle for leadership in the world’s fastest growing major market, with researchers divided over which company is ahead. Canalys last month put Micromax in first place with 22% in the December quarter, edging out Samsung’s 20%.
A few days later, Counterpoint estimated that Samsung was still the top smartphone vendor with 27%, beating Micromax’s 20% in the December quarter. International Data Corporation later agreed, estimating Samsung’s shipments at 22% of the market, and Micromax at 18%.
“The reality is that we’re very close," Taneja said. Micromax intends to secure 30 percent of the Indian smartphone market by the end of its next fiscal year.
New models
The company’s next closest local rival, Intex Technologies (India) Ltd. captured 8 percent, according to IDC. Apple Inc. didn’t make the top five in India, where the iPhone 6 starts at ₹ 53,500.
More than two-fifths of shipments last quarter were for devices priced between $100 and $200, according to Canalys, and Micromax has made its name selling smartphones within that range. One of its best-selling devices, the Unite 2, has a price close to the bottom of that range and sells for ₹ 6,394. It comes preloaded with English and 20 Indian languages.
In November, Micromax started a new company, YU Televentures, to make premium phones and other Web-connected devices and better compete against Samsung and Xiaomi, which entered India in July.
Its first phone, the Yureka, sports a 5.5-inch screen and a version of Google Inc.’s Android operating system developed by Cyanogen Inc. It sells for ₹ 8,999 on Amazon.com Inc.’s Indian website. YU will probably release three or four models to reach consumers at all levels, Taneja said.
Local plants
“The hardware business is commoditizing rapidly and will continue to do so," said John Butler, a telecommunications analyst with Bloomberg Intelligence. “So, the best way to counter this trend is to get into high-margin services like apps, software and content."
Micromax also plans to expand its local assembly capacity, as Prime Minister Narendra Modi’s government more than doubles to 12.5 percent the import duties on mobile phones. The company now puts together half a million phones a month at its factory in the northern state of Uttarakhand, using parts imported from China and Taiwan. The company plans to build a second assembly plant in the state of Rajasthan.
Within the next five years, Micromax wants to get some of its component makers to build satellite plants near its manufacturing facility.
“Twelve percent is a lot of money in a hardware business. much more than your bottom line," Taneja said. “I don’t think you can sustain a large business as a serious player who wants to grow in this country without making in India." Bloomberg
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