Alibaba Group Holding Ltd (NYSE:BABA) is in plans of buying 20% stake in Micromax to expand in the smartphone market and penetrate into the Indian mobile market. This would mean that Alibaba would be investing $1.2 billion in Micromax that has a net value of $6 billion.
India is growing at a fast pace in the Asia Pacific region and is ranked third in the global smartphone market. This would come as a smart move from Alibaba and Micromax is going to help the company diversify. This step seems optimistic for Alibaba as the trade analysts feel that it needs to venture outside China. It will also help the company offer tough competition to rivals like JD.Com Inc (ADR) (NASDAQ:JD). The company officials have not commented on the deal so far.
Expansion Move
If this deal gets through, Alibaba services like Alipay would be available on Micromax phones. This deal will also aid Micromax in raising capital to meet its expansion needs like personal computing. In India, Micromax has 18% share in the mobile market as per IDC research and aims at providing the best technology at affordable prices.
The talks are still on and Micromax is already seeking investors for its upcoming projects. The collaboration would be a win-win situation for both the companies.
Alibaba Operating System in Micromax
The operating system from Alibaba called YunOS will also be installed into Micromax devices that will help it offer competition to Flipkart and Snapdeal. YunOs is being pushed by Alibaba in the past few months and they invested $590 million in Meizu in February 2015 to help establish the system.
The partnership was aimed at helping Alibaba to sell economical phones in the less accessible areas of China and to make smartphones affordable for the less advantageous. This was to create a niche market in the untapped areas of the country.
It is important for Alibaba to spread its reach in the other markets as well to have a better revenue share from outside China. Currently, only Brazil and Russia are reporting around 5% market share of the company. The Micromax deal could come as a major breakthrough for the company, especially at a time when they are fighting to stay on top.
