The Enterprise Goes Global

After its success in India, Micromax plans to boldly go to countries where no Indian phone maker has gone before.
 Sunny Sen        Print Edition: April 13, 2014
Micromax co-founder Rahul Sharma at the India Today Conclave in Delhi
Micromax co-founder Rahul Sharma at the India Today Conclave in Delhi Photo: Shekhar Ghosh/www.indiatodayimages.com

In 2006/07, when Micromax, today India's largest domestic handset maker, reported revenues of Rs 16 crore, Rahul Sharma and his three co-founders thought they could make it a Rs 1,000-crore company in a few years. They had no time frame in mind. But just seven years later, Micromax has grown about 500 times, to Rs 7,500 crore in 2013/14. The formula was simple: offer consumers the handsets that they wanted - the qwerty "Q" series in 2009, the Swarovski-encrusted Bling series for women in 2010, and more recently, Android touch phones - at some of the lowest rates in the market.

Micromax's leading rivals have changed over the last seven years. In the feature phones era, it fought Nokia. When qwerty was a rage, it was pitted against BlackBerry. Now it is taking on Samsung's and Apple's smartphones. While Nokia and BlackBerry are struggling, Micromax has grown stronger. And Sharma, who drives a Bentley Continental GT, is dreaming bigger: he wants Micromax to be among the top five globally in five years.

The journey has begun. In January, Sharma travelled to Moscow to launch the Micromax brand in Russia. It is already present in Sri Lanka, Bangladesh and Nepal, but then these countries' culture and consumer needs are similar to India's, and Micromax is among the top three handset makers in all of them.

Russia is different, and therefore a challenge. It is a large smartphone market - about 40 per cent of all handsets are smartphones, compared to India's 19 per cent. Smartphones account for 60 per cent of Micromax's revenue, and their share is growing. So it makes sense for it to be in markets with a high smartphone base.

Sharma also sees Russia as the gateway to Eastern Europe, which is a retail-led market like India, and not an operatorbundled market like the US and Western Europe. Next in line is Romania, Sharma told Business Today at the India Today Conclave, held in New Delhi March 7 and 8. He said Micromax had its sights set on other countries in the region, including the Czech Republic, Hungary, Poland, and Slovakia, adding: "If you have tasted success in Russia, you can quickly expand into these countries."

It took Sharma a year of planning to launch the brand in Russia. Micromax saw an opportunity as Nokia, despite leading in the Russian market, was on the back foot globally. Sharma had figured that the products needed to be different. Successful products such as Canvas and Bolt have been adapted to Russian needs in terms of design and apps. Gmail is replaced with mail.ru, Russia's largest mail service.

Besides Facebook, the phones have the Odnoklassniki social networking app. Instead of Google search, there is Yandex, which gets 60 per cent of Russia's search traffic. Micromax's international revenue is still small - under 10 per cent - but Sharma says that in five years, it should be half of the turnover. "We are investing millions of dollars for this expansion," he says. He adds that the company plans to spend Rs 100 crore in Russia for expansion.

This is not the first time Micromax is trying to expand globally. Its earlier attempt bombed. In April and May 2010, it had planned to launch in Nigeria and Brazil, but those plans fell through. It had a presence in the UAE, but it was a smartphone market, and Micromax hardly had a smartphone portfolio. (It still sells in West Asia through a handful of retail chains, including Carrefour, Axion and Lulu, but it is absent from smaller stores.) So Micromax shelved its international expansion plans in 2010 itself, as the Indian market was growing fast and smartphones were becoming popular. "We regrouped and thought things over, and decided to focus first on India," says Vikas Jain, another Micromax co-founder. In 2011/12, the company was restructured. It became fully automated, implemented processes for enterprise resource planning and customer relationship management, and created verticals for smartphones and feature phones.

Revenues dropped 34 per cent to Rs 1,600 crore, but in the next year they more than doubled.

The company is now in better shape financially, and can take larger bets and risks. Sharma says Micromax has no debt on its balance sheet. He says the company will put in money initially on entering a country, and after that, revenues from that location would be reinvested in that region. Targets are clearly measured and set. "We are very, very clear that the region has to start making money in the second year," says Sharma. He adds that he doesn't believe in taking loans from financial institutions for expansion. The company has only raised one round of funds from TA Associates and Sequoia Capital, which together hold about 20 per cent of Micromax. The rest is held by the four founders.

To make a business case, Jain says, it is important to have a double-digit market share in every country. "We do not want to be present in a country where we cannot make a difference," he says.

Micromax sees Russia as a gateway to Eastern Europe, which is a retail-led market like India, and not operator-bundled one like the US

The company has signed up X-Men star Hugh Jackman to give Micromax international appeal. The deal was sealed within 24 hours, after just one meeting with Jackman during a film shoot in Los Angeles. A couple of Skype calls followed, and Jackman was on board, ready to shoot an advertisement. "We were shocked," says Sharma.

Besides Russia and Romania, Micromax plans to enter two more countries this year. As in India, it will face competition from Nokia, Apple and Samsung in its new markets. But Sharma is undaunted. He says: "In India, we have challenged all international players... If we can demonstrate this in India, we can do it in any other country."

Analysts say Micromax has the potential to be successful internationally. "It is a full-grown handset company, which has the experience of selling devices in a big market, and they understand the end-user demand," says Anshul Gupta, telecom analyst with global research firm Gartner. Sharma's dream is not merely international expansion. He looks forward to the day when a Micromax ad airs during the Super Bowl, the biggest event in American football (at the last Super Bowl, in February 2014, a 30-second slot cost around $4 million). "That will be my ultimate day," he says.

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