Micromax : Nothing micro about it

ALTHOUGH he’s never driven a truck in his life, Rahul Sharma’s past, present and future is memorably connected to a truck battery. In August 2007, in the powerless village of Behrampur in West Bengal, Mr Sharma saw an Airtel PCO being powered by a truck battery. Every night, the PCO owner would lug the battery 12 km to an adjoining village on his cycle, charge it there overnight, and lug it back to Behrampur in the morning. In late 2007, when Micromax decided to diversify from PCO devices into the business of mobile handsets, the PCO owner of Behrampur was the inspiration for its first product. The company designed a battery that could last 30 days on a single charge and give 17 hours of talk-time. Micromax asked vendors in China and Taiwan to manufacture 10,000 handsets with these battery specs. The X1i, priced at Rs 2,249, was an instant hit in rural India, and Micromax’s handset business was on its way. In just 30 months, by staying with this philosophy of making handsets that address specific user needs and are also affordable, it’s come a long way. Says Rajesh Agarwal, one of the four promoters: “We sell a million handsets a month now. With a market share of about 10%, we are a close second to Samsung.” There are many views on that 10% figure. Citigroup put it at 10% in February, a top executive of a rival says it’s 8%, IDC India says it was 4.8% in 2009. According to IDC, Nokia had a market share of 54.1%, Samsung 9.7% and LG 6.4%. Never mind the quibbling over numbers. Fact is, the company is mounting a serious challenge to the slippery No. 2 spot in the mobile handset business. In the past four years, the second spot has been lost by Motorola, Sony Ericsson and LG. Samsung has held it for the past 24 months, but Micromax is catching up. “We will be No. 2 by the end of this fiscal,” says copromoter Vikas Jain.

PHONY JOURNEY

30-DAY BATTERY PHONES
April 2008: Rs 2,249; Now: Rs 1,999 The X1i, Micromax’s first phone, had a battery that could give 17 hours of talk time and go 30 days on a single charge.

DUAL-SIM PHONES
July 2008: Rs 1,999-12,999 For those who want two numbers but one handset

PHONE-CUM-REMOTE
May 2010: Rs 2,999 A mobile that can switch TV channels and even change the AC temperature

PHONE-CUM-STEREO
Feb 2010: Rs 4,999 With 3D surround sound, fed by Yamaha and Wolfson

BLING

with sales of 250. Rajesh Agarwal started Micromax in 1991 to distribute IT peripherals. A phone that can be used as a computer mouse Micromax focuses on being different MICROMAX. And one of Mr Arora’s friends was Vikas Jain. Mr Jain moved to the US and joined GE. Airtel was its first client. posted revenues of Rs 1. Will their existing customers buy Micromax again?” Before it found its centre. Says Romal Shetty. which hasn’t changed since. After college. KPMG: “In the mid. But here’s where it gets tougher. Then. they had been customising a Nokia instrument.and high-end also. Against the 10. customers expect certain service quality. handles finance. is the business director. It was installing about 10. was Rahul Sharma. Mr Agarwal. They were used by call centres and PCOs. Emkay Global Financial Services: “Their biggest challenge will be brand stickiness.000 devices it sold for Nokia in a year. While they don’t say how the equity is divided among the four. Micromax has taken the utilitarian philosophy to the mid. Business peaked in 2007. oversees marketing. and convey the same through branding and positioning. The four divided responsibilities on functional lines. Micromax converted the threat into an opportunity. 34. Mr Sharma was friends with Sumeet Arora.000 devices. with a reasonable degree of success. The same year. a junior. again. changing its identity repeatedly. Their big break came in 1999. Micromax had revenues of Rs 10 crore and employed about 80 people. executive director.” says Mr Jain. So far. its promoters say. Micromax faced extinction. Again.and high-end. Now. head (institutional research). Micromax’s challenge will be to achieve such quality standards.500 A big hit with women. In 1999. “We had two options — compete on price or be different. Mr Arora joined Blue Star and Mr Sharma worked with an auto components company called Bundy Engineering. Mr Sharma. making it the largest Nokia distributor worldwide for these products. is the chief technology officer. all three quit their jobs to join Mr Agarwal. “As much as we were shocked. But.” says Mr Agarwal. they decided to build and sell the whole thing themselves — that too 40% cheaper than the Nokia 32. Mr Jain. One of his neighbours in Pitampura. when Nokia signed them up as an all-India distributor for machine-to-machine devices — essentially landlines that were customised to run on a mobile network. overnight. it all threatened to come apart. Overnight. comes with Swarovski embellishments IN THE WORKS A mosquito-repellent phone. Nokia decided to exit this segment. and Mr Kumar. . Micromax dabbled on the fringes.600 crore and a net profit of Rs 150 crore in 2009-10. they do say theirs is an easy relationship. Early on.” Asks Ajay Parmar. 45. 35. “We decided to be different.000 Nokia 32s a year in India.Feb 2010: Rs 5. By 2004. It would be eight years before they would come together to do business. an IT education company dealing in e-commerce and embedded technologies. we decided to turn this into an opportunity. different meant a longer battery life or a phone that had two SIMs. in West Delhi.000 of its own within a year. 35. They set up Micromax Technologies.” In its case. managing director. the mobile revolution took over. national telecom head. Micromax was selling 35. they decided there was no point in aping the leaders. In Delhi’s Jamia Millia University.

Himachal Pradesh. Neither does it intervene in how the super-distributors sell or place the products. The company now plans to expand to Middle East. Also. company executives refused to comment. Says Mr Sharma: “Customers were willing to pay a premium of Rs 200 for the X1i. say the company fares poorly on after-sales.200 crore. US-based private equity firm TA Associates invested $45 million (about Rs 200 crore) in Micromax for a minority stake. Micromax refused to give credit. it went rural.000 units per month to 500. While Micromax has not specified the exact holding. he will worry about his daily sales. But it went about the business differently. In December 2009. ET has reliably learnt that TA picked up 15-20%. Micromax sourced its handsets from 12 factories in China. There’s a mosquito-repellent phone. Micromax plans to launch four handsets a month. Micromax also looked at distribution in a new way.000 handsets and ask him to sell them over a month. Mr Agarwal says: “The plants we are associated with also manufacture handsets for all global majors.” says Mr Agarwal. Some of Micromax’s competitors. They don’t apply different standards while manufacturing for us.500 crore. there is no pressure on him to sell them.” explains Mr Agarwal. even if another vendor had better capabilities to execute a particular model. “It addresses a segment that is comfortable with the useand-throw philosophy. “If the distributor does not buy your handsets. Micromax offered to supply distributors regularly to keep inventories down.000-3. South Korea and Taiwan. “If we give a distributor 1. That would value Micromax at Rs 1. While industry and banking executives indicate a mop-up of around Rs 600-800 crore. instead of manufacturing itself. “We offer our super-distributors a 15% margin. which is designed to emit frequencies to repel mosquitoes. to ensure its outsourcing model does not cause supply-side uncertainties. and a waterproof one. Bangladesh and Nepal. Micromax is investing Rs 100 crore to set up a manufacturing plant in Baddi.” He also points out that their phones sell well in rural India. it doesn’t interact with the 500-plus sub-distributors. standing by its cash-only model. “But if we supply less.” claims Mr Jain. The truck-battery philosophy still rules at Micromax. While rivals offered a 60-day credit line. who do not want to be named. It worked. This is different from. So. respectively. Over the next six months. at a valuation of Rs 3.” Micromax has 34 super-distributors across India. It stressed on product innovation for the low-end.” Then. which would be compelled to stay in-house or go to a vendor-partner. Nokia. say. Nokia and Samsung have 900 and 800 service outlets. It has also learnt that the company is looking at an IPO. Unlike a Nokia or a Samsung. It was model-based sourcing: Micromax would come up with an idea and give it to the factory best placed to deliver it.Six months on. At the same time. So. a phone that doubles up as a computer mouse. distributors didn’t have to shell out large amounts upfront or have a lot of money locked in. where users demand longevity. it too hopped on to the mobile bandwagon. the company’s claim of 450 service/care centres are inflated. priceconscious user.000-1. demand will be close to equal or more than supply.” says an executive with a rival telecom firm. Production is being scaled up from 50. The Micromax promoters refute these charges. Africa and Latin America.000 units a month by March 2011. . On product quality. Micromax has already used the TA funding to expand to neighbouring countries such as Sri Lanka. which is higher than the industry average of 6-10%.

the company forayed into one of the most predominant genres of telecommunication – Mobile handsets. In the year 2008. Handsets with Dual SIM / Dual Standby. Cost-Effective. Micromax has successfully generated innovative technologies that have revolutionised the telecom consumer space. Micromax ventured into the telecommunication industry with an end-to-end solution of Fixed Wireless Devices and Wireless Data Cards. the company plans to have an aggressive market incursion to reach out to its customers through 70. the company has an optimistic outlook for the telecom consumer space. Handsets Switching Networks (GSM .000 stores across the country. With young enthusiasts as its anchor. Micromax Informatics Limited has created a niche for itself in the telecommunication industry. Micromax is on a mission to successfully overcome the technological barriers and constantly engender “life enhancing solutions”. Operator Branded 3G Handsets. Dubai and now in Nepal. . Currently present in more than 40. The company’s vision is to develop path-breaking technologies and efficient processes that incubate newer markets.About Miicromax Micromax is one of the leading Indian Telecom Companies with 23 domestic offices across the country and international offices in Hong Kong. Since then Micromaxhas received commendable response for its unique and interesting handsets. After building a strong presence in the rural market. Today Micromax has become a brand which people relate and look up to for realizing their individual device preferences and other out-of-the-box solutions. etc With a 360 degree advertising and marketing strategy sketched out. Innovation. Aspirational Qwerty Keypad Handsets. where the prominence of both subscribers and operators is rapidly increasing. USA. enliven customer aspirations and continue to make Micromax a trusted market leader amongst people. have now become synonymous to Micromax in the telecom vertical. OMH CDMA Handsets. It was the first to introduce: Handsets with 30 days battery backup.CDMA) using gravity sensors. Micromax has a lot of “firsts” to its credit on their versatile product portfolio. Credible and an Insightful R&D. One of the major aspects that contribute towards the substantial monthly growth of Micromax is its 80% sales in the rural areas. Micromax’ is now progressively moving towards establishing its foothold in the competitive urban towns as well. With a futuristic vision and an exhaustive R&D at its helm.000 operational stores in the coming year. The Micromax ideology stems from its rooted belief in ‘Innovation’ and delivering “nothing short of the best”. after delivering upon the technology of fixed wireless-powering desired products.

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