Essar phone arm goes shopping with $75 mn

To launch phones under private label.

The Essar group’s mobile retail arm, The Mobile Store, plans to raise $75 million (approximately Rs 375 crore) to fund its acquisition plans, among other things, in India. Speaking to Business Standard, CEO Rajiv Agarwal said, “We are talking to various private equity players to raise funds for our expansion plans, which include acquisitions as well as setting up new stores in the country. Though we are not in final stages of talks with any player for acquisition, we will be looking at Indian companies.”

As another sign of consolidation in the mobile retail space, BK Modi’s Spice Group fully acquired the Indian arm of Dubai-based mobile retail player, Cellucom. The deal, which happened last month, is through a share-swap involving Spice acquiring Cellucom’s India stake, while Cellucom invested to acquire 26 per cent in Spice’s mobile retail arm, HotSpot. Spice Corp will now invest Rs 100 crore in the retail arm.

While Agarwal did not disclose the stake that would be diluted through Mobile’s proposed expansion, he said the investments would be completed within three months. “It is too premature for us to comment on the stake that we will sell. However, it will definitely be only a minority stake. We are in talks with both foreign and Indian private equity firms.”

Agarwal said the company planned to raise the number of mobile retail outlets to 1,800 by 2010 and to take it to 2,500 by the next two years. “India is a very large market and the mobile retail market has a large potential given the number of subscribers that are being added in the country every month. We have only about 6 per cent of the total mobile retail market, so we do have scope to expand,” he said.

Analysts say $75 million is a huge amount and the company has good opportunity to acquire a company with this much money. “For Essar, making a strategic buy in some regional mobile retailing chain will be a good option to increase its presence in the local regions as mobile retailing has very few national players,” said Purnendu Kumar, associate vice-president, Technopak.

“All mobile retailers are doing well even during the recession because, due to economies of scale, they are able to offer aggressive pricing,” Kumar added.

The company is also planning to launch phones under its private label during the year. At present, The Mobile Store has around 1,400 outlets which, apart from mobile phones, sell accessories, mobile connections and recharges and provide services like bill payments and mobile repairs.