Private equity firm TA Associates has announced an investment of $45 million in Micromax Informatics Limited, a Delhi-based handset maker. According to The Economic Times, post investment, TA Associates will have a little less than 20 percent stake in the company. TA Associates is the first institutional investor for Micromax. Ajit Nedungadi, a Managing Director at TA Associates and Naveen Wadhera, Director, TA Associates Advisory, will join the Micromax Board of Directors.  TA’s prior investments in India include cellular operator Idea Cellular in 2006 and  GlobeOp Financial Services, a London-based specialist BPO company serving the financial sector with three offices in Mumbai.

The Rise Of Domestic Handset Makers

Micromax entered the handset manufacturing business in April 2008 and at present claims to be the third largest handset provider in India, as measured by volume. Indian handset manufacturers including Karbonn, Lava, Fly by Meridian Mobiles, Micromax and Movil by Bling Telecom have increased their market share to 15 percent in 2009 and this is projected to rise to 25-30 percent in the next three to five years.

The Indian wireless market is one of the fastest growing in the world, adding 10 to 15 million mobile subscribers per month. The number of subscribers is expected to grow to over 800 million over the next three years. With the crackdown on Chinese manufactured phones with no or fake IMEI and the growing number of mobile phone subscribers, local handset manufacturers could further increase their share of the  pie in the near future.

Expansion, Micromax’s Plans

The investment will be utilised by Micromax to expand its handset business to Nepal, Africa and Latin America. They are to launch in Nepal later in the month. A portion of the investment is subject to certain conditions though the conditions have not been disclosed.  Goodwin Procter LLP and Lexygen provided legal counsel to TA Associates. Grant Thornton served as the sole financial advisor and  INDUS G&D Law provided legal counsel to Micromax.

Last year in February Micromax had announced that it was looking to dilute a minor stake through IPO or private placement and would be investing Rs 125 crore over the year in the Indian market.

Micromax recently launched an open market handset for CDMA networks which allows users the flexibility to choose a SIM card from any CDMA operator. The handset is expected to be priced below Rs 4,500 and available across India. Micromax has 45,000 retail points in 120 cities across the country.

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