Micromax unlikely to face music due to co-founder’s resignation

Micromax co-founder Rajesh Agarwal’s resignation will prompt smartphone makers to cash in on, but there will be no impact on its sales. Micromax is India’s second largest smartphone player, ahead of BlackBerry, Apple, Nokia, LG, Sony, HTC, Huawei, Lenovo, etc.

Though Micromax is currently managed by a couple of professionals at the helm, the management — including daily operations — is fully controlled by co-founders, Indian mobile phone users will not look at the CBI raid and co-founder’s resignation before buying a Micromax phone.

However, the unethical issues may impact the strategic directions and fund raising plans of Micromax in the short-term. Though the co-founder has resigned, he could still give proper direction to the firm since he holds equity and will try to protect his interests in the growing smartphone firm, analysts said.

Faisal Kawoosa, senior manager – Research & Consulting, CMR Telecoms Practice, said: “There will be no impact on sales of Micromax. Micromax is in a price sensitive smartphone market and if they can continue to offer innovative and budget phones to Indians, rivals will not gain from the current trouble.”

On the corporate side as well, Micromax will not face issues — fund raising and strategic directions — as the company has strong investors.

Samsung, Micromax, Karbonn, Sony, Nokia in top smartphone market share in Q2 2013

If there’s an impact on its brand image, the main beneficiary will be Samsung, Karbonn, Sony and Nokia — the top 5 smartphone makers in India.

Micromax unlikely to face music due to co-founder’s resignation

Micromax fund raising plans

Micromax has been planning an initial public offering (IPO) for the last two years. Earlier, Rajesh Agarwal clarified that it does not an IPO for expansion. But its investors are in a hurry to cash in on from their investment.

Four private equity funds – Sequoia Capital, Sandstone Capital, Madison India Capital and TA Associates – invested around Rs 400 crore in Micromax for minority stakes in 2010.

An analyst with foreign research firm endorsed CMR’s views on sales front. “Sales impact will be very less. Users do not look at these kinds of issues before taking a buying decision. Micromax has done well in India and will continue with its market share if they can bring new products as per their earlier plans.”

Smartphone major Nokia is facing a tax evasion case in India. Telecom operator Vodafone is facing Rs 11,000 crore tax issue in the country. Most of the telecom operators have similar issues. Several software companies are also facing probe.

But bribe is completely different from tax issue.

“Nokia did not face any issues on its sales due to the recent tax problem,” CMR’s Faisal Kawoosa said.

A local court last week sent Rajesh Agarwal and Manish Tuli, along with four government officials, to CBI’s custody for seven days on initial charges of criminal conspiracy and corruption. ( Micromax co-founder Rajesh Agarwal arrested in bribery case )

Rajesh is inspired by Warren Buffett. CAN he bring more energy to Micromax?

Baburajan K
[email protected]