Domestic smartphone maker Micromax is about to sell 25% of its stakes to Ant Financial Services Group, a Chinese online financial services firm, ending months of speculation that the company is on a hunt for outside investor to face growing competition from Chinese Xiaomi.
The consortium, which owns Alipay, seems to have valued country's second largest handset maker at around $4-5 billion, The Economic Times reported quoting five persons close to the matter.
Alipay, online payment solution firm launched in 2004 by China's Alibaba Group, is expected to bring in two to three partners in the Micromax deal.
"More partners will give divergence of views and comfort to the lead investor," the source said.
Micromax stake sale report follows Xiaomi's announcement on Sunday that Ratan Tata had invested undisclosed amount in the Chinese smartphone manufacturer.
However, the success of the Micromax deal partly rests on company's promoters and its chairman Sanjay Kapoor sorting thier differences over the future strategy of the company.
The promoters Rahul Sharma, Rajesh Agarwal, Sumeet Kumar and Vikas Jain account for about 80% of the stake in the company.
Kapoor, a former CEO of Bharti Airtel's Indian business, is of the view that the company should concentrate primarily on online sales, whereas the promoters differ saying that 70% of the revenue is still from retail channels.
"There are also disagreements over the positioning of the phones and technology adoption. Kapoor believes Micromax should increase its average selling price while promoters feel there is still immense potential in the mass market," one of the people said.
Nevertheless, Ant Financial Services seems to go ahead with the deal regardless of these differences.
Micromax had appointed Kapoor as chairman in June 2014 to boost sales and strengthen its brand before going for an initial public offer (IPO). Besides, the company hired Samsung India's mobile head Vineet Taneja and another Bharti Airtel veteran Badal Bagri.
The company has put aside its IPO plan for now to bring in strategic investors. It recorded revenue of over Rs 11,000 cross in the last fiscal 2014-15.
Apart from promoters' stake of around 80%, 15% is owned by TA Associates. While Sequoia Capital and Sandstone Capital own 2.68% each, Madison India Capital holds around 0.4% stake.
