Alibaba Group Holding Ltd (NYSE: BABA) financial arm Alipay is inching close to a deal for buying 25% stake in India’s largest mobile phones manufacturer Micromax. The Chinese online financial company as part of a consortium reportedly values Micromax at around $4 to $5 billion according to people close to the talks.
Need for a divergence of views and assurances to the lead investor is believed to have been the main reason for Alipay pursuing stake in Micromax through the consortium. The deal should see the injection of more cash into Micromax businesses as one of the ways of scaling the business. The deal is also an indication of how Alipay is trying to expand its revenue streams away from Alibaba Group Holding Ltd (NYSE:BABA) e-commerce business.
Alipay aims for mobile
Alipay could also use the opportunity to resurrect phone wars with Xiaomi, which has been expanding its market reach with a range of products specifically targeting emerging markets. Alipay, which is Alibaba Group Holding Ltd (NYSE:BABA)’s main payment system in its online platforms, is also reportedly planning to go public a move that will see it offload some shares to the public.
Should the deal go through, it will be Alibaba Group Holding Ltd (NYSE:BABA) group’s second investment in one of the fastest growing emerging markets in the world. Alipay has already expanded its wings in India’s payment space with the investment of $575 million in Paytm, earlier in the year. For the deal to be sealed a number of issues will have to be ironed out according to people close to the talks.
India is a key market
The bone of contention has to deal with the direction Micromax ought to follow heading into the future. The fact that Micromax generates nearly 70% of its revenues from offline and traditional retail channels makes it a viable model heading into the future, according to the promoters. However, the new guard led by the company’s chairman Sanjay Kapoor prefer the company venturing more into online sales.
The deal by Alipay affirms Alibaba Group Holding Ltd (NYSE:BABA) CEO, Jack Ma, belief of the importance of India’s e-commerce and mobile segment that continues to grow fast, much to the excitement of many multinationals.