Alibaba Eyes India's Mobile Space With Micromax Stake

by CXOtoday News Desk    May 08, 2015

jack ma

Alibaba Group Holding is reportedly in talks with Micromax Informatics to buy an about 20 percent stake in the smartphone maker. With this, the Chinese e-commerce giant will expand in one of the world’s fastest growing markets for mobile devices. India is the world’s third largest smartphone market and was the fastest growing in the Asia Pacific region in the third quarter of last year, according to IDC.

The deal, if done, would see Alibaba investing as much as $1.2 billion in Micromax, the second-largest smartphone brand in India by sales, at up to $6 billion, sources told Reuters. Micromax and Alibaba began talks on the stake sale after discussions with investors led by Japanese telecoms firm Softbank which was stalled over differences in valuations, a source familiar with the matter said. Softbank is the largest shareholder in Alibaba.

Read more: How Alibaba Created History With Its IPO

While both the companies declined to comment, sources said Alibaba wants to use the Micromax deal to tap into the increased number of internet users in India in one of the vibrantly growing smartphone markets.

In a report last year, Jack Ma hinted that he is setting his eyes on India. He has deployed a high-level team to increase engagement with India, promises to invest more here and is likely to hire Indian talent. “We’ve a team here, and we are getting in more people,” Ma told TOI here, when asked about the company’s acquisition plans in India.

The growth in India’s market would also help Alibaba offset the stringent competition at home from domestic rivals in the Chinese market. Of the various possibilities, Alibaba, could roll out services such as Alipay, its online payment platform, on Micromax phones. Ant Financial Services Group, which owns Alipay, is China’s largest payment service provider and is controlled by Jack Ma.

The stake sale is also aimed at helping Micromax raise capital as it expands into new business segments including personal computing. Micromax recently announced it will invest up to $400 million this year to pick up stake in at least 20 start-ups across segments like healthcare, entertainment and gaming as part of plans to strengthen its services portfolio.

Read more: 3 Ways Micromax Is Keeping Its Rivals At Bay

Started its operations in India in 2008, Micromax, known for its affordable, large-screen phones are now the country’s most popular after Samsung Electronics. The Gurgaon-based firm counts Sequoia Capital and TA Associates among its investors, is looking at picking up stake in as many as 20 companies this year across the globe.

Micromax co-founder Rahul Sharma had earlier said in a statement, “We are looking at building an ecosystem of connected devices and offer customized experience to users.”

Meanwhile, strong revenue from mobile transactions helped Alibaba report a 45 percent increase in quarterly revenue released on Thursday. Tech analyst, Doug Young, mentions, Alibaba’s India focus looks like a relatively smart move strategically as India is far less competitive than more mature western markets and shares many characteristics with China.

“If things go well, Alibaba could potentially make one or more eventual bids to completely acquire some of these Indian investments and ultimately roll them into one big local company. But that would be years away, and things could easily change over that time for such a rapidly evolving market like India,” he mentioned.