Rahul Sharma still feels bad that his father never bought him a motorcycle. He first asked for it in the 10th standard. Much later, the father got him a scooter, whose memory still makes Sharma scoff.
Now the owner of a Bentley, a car whose cheapest version costs Rs 2.5 crore, Sharma, 40, has not forgotten what it means for a middle-class family to shell out `50,000. That has shaped Micromax, the telephone handset maker he set up with three friends 16 years ago, into a leader in the price band of Rs 3,000 to Rs 10,000.
“We are the Zara of telephones. We have no wish to be a Louis Vuitton, or a Gucci,” says Sharma. But he won’t be confined to the scooter mindset for long either. Although Micromax won’t give up its core market, it’s doing a bunch of things to acquire a new skin, and markets.
Hang on, isn’t Micromax on the mat? A year ago, Hong Kong-based research house Canalysis put Micromax at the top of the heap in the Indian smartphone market, ahead of Samsung. Now it’s fallen behind Samsung by 13 percentage points, according to data from IDC, another research outfit (Canalysis data isn’t out yet). Chairman Sanjay Kapoor left a while ago. More recently, CEO Vineet Taneja resigned. Reports linked the exits to loss of market share.
Sharma, though, wants to look at the big picture. “Do I worry about the loss of market share or CEO? Not at all. For me it’s all about the fight for number one.”
So, a fight with Samsung?
“Yes, you can also say we are fighting with Google.”
Google? “Yes, nobody else in the world has done what we are doing, except perhaps Google with its Nexus phones.
A year ago Micromax set up YU Mobile, which owns the Yureka brand of phones. The new company is setting up an ecosystem of services and partnering with apps to support its handsets. “We will soon have 10 million users. How many companies can boast of so many? Maybe only e-commerce companies like Flipkart and Snapdeal. We can grow small companies into big ones.”
Micromax has invested in at least seven small companies in the last 12 months (grapevine says 10). These are small investments — a combined `200 crore — in small companies for big stakes, big enough to help them grow on the back of Micromax users. They give Micromax a presence in payments (Transerv), health (Healthifyme), music (Gaana), e-commerce (Scandid), taxi (Ixigo), and personal storage (MiMedia). Its phones already have something called Around, a Google Now kind of screen that helps users do a bunch of things, including book a cab by choosing between Uber and Ola. There will soon be a mobile wallet for transferring money as well as paying for various services on Micromax phones.
A factoid that refutes all talk of Micromax having fallen upon bad times is that all these investments, as well as the `300 crore spent on setting up three factories, have come from internal accruals. No outside funds had to be taken. And it remains a company free of debt.
But Micromax isn’t the only one building an ecosystem — LeEco wants to do in India what it has in China. “The phone is just a screen. We are loss-making on devices, we will make money on services, like we did in China,” says Atul Jain, COO, smart electronics at LeEco India.
Micromax’s Sharma is, however, sanguine about the challenge from China. The wave of companies that came from there was supposed to finish off Micromax, not least because many of them, such as Gionee, Oppo, and Coolpad, were its suppliers. That didn’t happen. “The Chinese challenge has come and gone,” says Sharma. Micromax says it sells 1.5 million to 2 million phones a month. Even the highest-selling Chinese brand, Lenovo, sells only a million.
But it may be too early to say their challenge has come and gone. “Indian brands are good with branding and distribution, but they lack customisation and design,” says Syed Tajuddin, head of Coolpad India.
Sharma is unfazed. He has taken the battle to the enemy camp. His top design team, 25 of them, all former Nokia executives, designs Micromax phones while sitting in Beijing. From 2018, Micromax will make all its phones in India. Its next goal is to sell more of pricier phones. In the band of `10,000 to `20,000, it wants to increase its share from 12% to 20%. All this will happen under the watchful eyes of the founders. No professional is likely to get a top position unless an exceptional case comes up.
But how about challenging Samsung again? “We will be number one again this year,” says Sharma.