Micromax weighs stake sale option

NEW DELHI: Handset maker Micromax is exploring several strategic options to sell its stake to companies such as China-based Alibaba and Japan-based Softbank, media reports said.

The promoters of the company are equally open to an outright sale of the business right now, provided valuation expectations are met, the reports said quoting people familiar with the development.

The promoters of Micromax are seeking a valuation of $3-3.5 billion or as much as Rs 21,000 crore which is 2.5-2.9 times FY14 total income of Rs 7,142 crore ($1.1 billion), according to Registrar of Companies (RoC) filings. It registered an EBITDA of Rs 439 crore and profit after tax of Rs 284 crore that year.

If such deals get materialized, it will give bumper exits to private equity and financial investors like TA Associates which came on board five years ago and currently own 15% of the company.

Micromax was valued at around Rs1,500 crore when TA invested in 2010, paying around Rs225 crore. Sequoia Capital and Sandstone Capital own 2.68% each while Madison India Capital controls around 0.4% in Micromax.

In 2012, China’s Spreadtrum Communications, a fab-less semiconductor provider invested $10 million for a minority stake. The four founder promoters — Rahul Sharma, Rajesh Agarwal, Sumeet Kumar and Vikas Jain–set up Micromax in 2000 as a supplier of parts to Nokia.

In 2014, the company was mulling to go for an IPO but now the plan has taken a backseat. “A stake sale of at least 26% now will also have a clear roadmap to a change of control. This will be a strategic and not a financial investor. You need a professional management to run the company during transition or even afterwards. But the promoters are also exploring selling out completely provided they get their premium,” said one of those cited above.

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