- Once the loved kid and the poster boy of the Indian smartphone industry Micromax is now on the fringes of the market, having failed to tackle the competition by Chinese smartphone makers such as Xiaomi and Vivo.
- The revenue of the company has diminished to Rs. 4,345 crore in 2017-18 from Rs. 11,041 crore in 2014-15 while net profit plunged to Rs. 103 crore from Rs. 3,362 crore during the same period.
The valuation of Micromax Informatics has crashed around 93 percent in the last four years from a high of Rs. 21,000 crore in 2015 to less than Rs. 1,500 crore now with the major private equity investors TA Associates and Sandstone Investment leaving the Indian electronics maker.
Private Equity players are selling a 6.9 percent stake in the company which values Rs. 93.65 crore to the promoters, which will increase the holding of promoters to more than 85 percent, the latest regulatory filings with Registrar of Companies (RoC) said.
Once the transaction is done, the four promoters- Vikas Jain, Rahul Sharma, Rajesh Agarwal, and Sumeet Kumar who hold 19,57 percent each will see their holding go up proportionately.
Once the loved kid and the poster boy of the Indian smartphone industry Micromax is now on the fringes of the market, having failed to tackle the competition by Chinese smartphone makers such as Xiaomi and Vivo. The revenue of the company has diminished to Rs. 4,345 crore in 2017-18 from Rs. 11,041 crore in 2014-15 while net profit plunged to Rs. 103 crore from Rs. 3,362 crore during the same period.
“With the onslaught of Chinese companies, Micromax lost both market share and ability to make a profit,” said Mohit Yadav, founder of business intelligence platform Veratech Intelligence that analyzed Micromax’s RoC filings for ET. “In this situation, investor seems to think Micromax is unlikely to recover and hence are willing to take a dip in valuation and take a quick exit,” he said.
Experts mentioned that the current valuation of Micromax will not be more than Rs. 1,358 crore with the consideration that the buyback will not exceed Rs. 26.34 per unit
As per Veratech Intelligence, this is just a mere fraction of the valuation in 2010 when Micromax got these private equities on board by selling equity shares at Rs. 2,390.62 per share and preference shares at Rs. 2,812.5 per share.
According to the RoC filings following shareholders are selling their shares in Micromax in the buyback- Wagner Ltd, an affiliate of TA Associates which once owned 14.82 percent but has pared stake in tranches, Madison India Capital HC, which owns 0.39 percent; Milestone Trusteeship Service Pvt Ltd, in its capacity as a trustee of Madison India Opportunities Trust Fund that owns 2%; Sandstone Investment Partners I fund, holding 2.65%; SCI Growth Investments II, a fund of Sequoia Capital owning 0.65%; and Sequoia Capital India Investment Holdings III that has 250 residual shares.
Chinese semiconductor firm Spreadturm Hong Kong Ltd remains invested in the firm with a 1.17% stake, as per the filing.
Given the monopoly of Chinese brands over the Indian smartphone market, a comeback seems impossible for Micromax and other Indian brands. With Micromax venturing into other durable consumer electronics and electric vehicles, let’s see what future beholds for the company.