Alibaba and Micromax in Conversation for an Investment Deal of $1.2 Billion

Alibaba and Micromax in the Conversation for an Investment Deal of $1.2 Billion

Alibaba, the Chinese e-commerce giant, is preparing to pick up a substantial stake in Micromax. Alibaba Group Holding Limited is a Chinese e-commerce company that has been providing consumer-to-consumer, business-to-consumer, and business-to-business sales services via web portals. It also provides electronic payment services, a shopping search engine, and data-centric cloud computing services.

On the other hand, Micromax is an Indian consumer electronics company headquartered in Gurgaon, Haryana, India. The company started as an IT software company in 2000 and worked on embedded platforms. It entered the mobile handset business and became one of the largest Indian domestic mobile handsets company operating in low-cost feature phone segments by 2010. As per Q3 2014, Micromax is the tenth largest smartphone vendor in the world.

This move is expected to help Alibaba is expanding its business in one of the world’s fastest-growing markets. If this deal is sealed and if it is completed, Alibaba will be investing $1.2 billion (about Rs 7,673 crore) for a 20% stake in Micromax. According to Reuters, this step would increase the valuing of the company at up to $6 billion which is about Rs 38,364 crore.

After the discussions with Japanese investor SoftBank failed last year, Alibaba started its conversation with Micromax. Jack Ma, the dynamic founder of Alibaba has been leading the talks. An interesting point is that SoftBank Corp has been a shareholder in Alibaba since 2000. Although, there have been no updates from Alibaba regarding the talks.

One of the Micromax executives also proclaimed that “Many investors have shown interest in picking up a stake in Micromax. There have been talks with Alibaba too, I cannot comment more than that”.

Alibaba on the hand released a statement saying, “As a company policy, we do not comment on market speculations.”

In March, during Jack Ma’s last visit to India, the company had tweeted “Jack meets Prime Minister Narendra Modi to discuss how Alibaba can help empower small businesses in India”.

Rahul Sharma, the co-founder of Micromax, had stated earlier to the media that “We are always open to new ideas and opportunities to make Micromax a leader in the electronics industry.”

As per the latest reports, the domestic handset maker is looking for funds from private investors, or even a possible stock market listing.

Recently, Micromax has also launched a new brand, YU in order to attract the youth and the developer community. Micromax is also planning to bring new and innovative devices to online marketplaces.

As per Shobit Khare, a telecom analyst with Motilal Oswal Financial Services, “Mobile commerce is emerging big over e-commerce and an investment, by online commerce companies, especially with smartphones growing in India, is an expected trend”.

Alibaba is planning to bring on services such as Alipay, its online payment platform, on Micromax phones. Alipay is owned by Financial Services Group is China’s largest payment service provider.

Micromax which was started up in India in 2008 and currently has Sequoia Capital and TA Associates as its investors.



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