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Micromax looks to enter China next year, may raise cash through public listing

Micromax did not comment on plans but said India’s largest home-bred handset maker was striving to be part of the top five club in the world.

, ET Bureau|
Updated: Jun 04, 2016, 04.39 AM IST
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Micromax did not comment on specific plans for China but said India’s largest home-bred handset maker was striving to be part of the top five club in the world.
Micromax did not comment on specific plans for China but said India’s largest home-bred handset maker was striving to be part of the top five club in the world.
NEW DELHI: Micromax, India’s No. 2 handset maker, is looking to enter China next year for volume growth in the world’s largest phone market in a bid to be among the top five in the world by 2020. For a tilt at the world’s top rankings, Micromax may raise cash through a public listing or a strategic partnership in the next two years.

Sources aware of internal plans of the company say it could start with a single model, which may be rolled out in partnership with a Chinese e-commerce major. It would have a different product portfolio for Chinese market while it could also consider local partners for a different operating system.

Micromax did not comment on specific plans for China but said India’s largest home-bred handset maker was striving to be part of the top five club in the world. “The vision will be realised by going to multiple countries, by being not only a hardware but a hardware and services company, and hence the experience,” said in a statement on Friday.

“For this, Micromax is open for a financial event over the next 24 months”. The company has entered a few international markets including Russia, where it is No 3.

China accounts for 31% of the global volumes, which makes the market a very compelling reason for Micromax, say analysts. “Micromax cannot achieve its major objective of being No 5 in the world if it is not in the largest mobile phone market in the world,” said Navkendar Singh, senior research manager at IDC India.

Micromax’s strategy of “offence” would in fact be the “best form of defense,” especially in China, from where a large number of companies have been coming to India to seek growth, despite the intense competition, Singh added. This is exactly what Vikas Jain, one of the four co-founders of Micromax Informatics, said.

"We are in the second largest market, and we're not afraid of being in the largest market as well, so you might see Micromax launching in China sometime soon," Jain said at Rise conference in Hong Kong. "So unless we do that, the top five (ranking) will elude us."

However entering China won’t be easy. For starters, the market is moving from entry-level to mid-tier priced smartphones, not Micromax’s core strength. Its success in India is driven by its dominance in the low-end smartphone and featrurephone segments. Besides, it does not have a strong set of local services to offer to customers – unlike a Xiaomi or LeEco – which can help it break competition clutter, say analysts.

“About 20% of the total smartphones sold in China in the January-March quarter – 101million – were around the RMB 3,000 range (around Rs 30,000), making it one of the most mature markets globally,” said Tarun Pathak, senior analyst at Counterpoint Research. Most of Micromax’s phones are priced below a third of that.In order to crack China, the company would have to start with catering to the open market, analysts said.

And it would need a war chest to take on cash-rich Chinese companies, many of whom are splurging in India to make a mark in a market which is also intensely competitive.

Micromax says that while it may not need cash infusion in the short term, it is open to a financial injection from a strategic partner.

"The company could do with more cash coming in, which would accelerate growth as we look for acquisitions and invest in start-ups," Jain said.

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