Author(s): Peter Bryer
Last week India's press reported on investment talks between Japan's SoftBank and Indian device-maker Micromax. SoftBank is said to considering a $1 billion investment in Micromax for a 20 percent share in the company.
The potential investment in Micromax would come at a time when the company is looking toward regional expansion and public proclamations of becoming a top-five global handset brand. At Mobile World Congress 2015, Micromax's CEO, Sanjay Kapoor, spoke of aggressive expansion into other emerging markets with devices and services. A partnership with SoftBank could provide Micromax with preferential treatment from distributor Brightstar, in which SoftBank holds a majority stake.
Micromax has become one of the top smartphone brand in India thanks to a diversified portfolio and a home-field advantage allowing it to localise its products. Yet despite its recent success, the company is coming under increasing pressure from Chinese and other Indian brands. In particular, the success of Xiaomi and its high-profile partnership with Indian e-commerce site Flipkart (See "Amazon of India" Partners with "Apple of China") has given the Chinese manufacturer a firm footing in India.
Micromax already has a presence in other markets including Bangladesh, Nepal and Sri Lanka. A $1 billion investment would enable Micromax to support products in these countries while expanding into other Asian and selected African and European markets. However, CCS Insight believes that Micromax will face significant challenges in establishing its brand well beyond its borders given the increasing level of competition from newer Chinese handset manufacturers as well as from established brands such as Samsung and Lenovo.
Micromax is still a privately held company. A financial investment by SoftBank, a company with a reputation as an insightful investor, would provide Micromax with clout as well as cash for its own investments. It would also provide Micromax with the basis for a public offering. Investment interest in the Indian market is likely to continue thanks to its potential for growth. Given Micromax's surge up the market share ranks, the company is likely to be evaluating other investment deals, providing it with near-term financial security.