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Karbonn may dip toe in private equity market

Home-grown handset maker plans to raise Rs 400 cr

Reghu Balakrishnan  |  Mumbai 

Karbonn Mobiles, the home-grown handset maker, appears to be again trying to tap the private equity (PE) market, to fund expansion and new products.

According to sources in the know, some PE investors have shown interest in the company. The company, a joint venture of the Delhi-based Jaina Group and the Bangalore-based UTL Group, has a little less than five per cent share in the Rs 55,000-crore Indian handset market.

Karbonn had plans to raise Rs 500 crore in 2011 by offloading minority stake. The deal didn't go through, as the fundraising scenario changed adversely.

People in the know say Karbonn wishes to raise Rs 250-400 crore now, by diluting 10-15 per cent stake. According to investment bankers, the company’s valuation has almost doubled in the past two years. It is looking for a valuation of Rs 5,000-6,000 crore, almost three times the annual revenue of about Rs 2,000 crore. Karbonn sells about a million handsets a year.

Company officials said it was yet to decide the fundraising route. Shashin Devsare, executive director, said: "We are looking for external investment and the final decision will be taken in the first quarter. However, we are yet to decide on the route of fundraising — PE or a strategic investor." He refused to disclose the valuation and size of the proposed fund.

In the past couple of months, Karbonn has been aggressive, with a series of launches in a Rs 10,000-plus category of smart phones. After launching the Karbonn A111 and S1 Titanium, it is taking on the Samsung Galaxy Grand with its new S5 Titanium, priced at Rs 12,000. S5 Titanium has come out with a quad core Snapdragon processor (1.2GHz) against Galaxy Grand's dual core 1.2Ghz processor.

"We have a strong presence in the Rs 5,000-15,000 range of products. After launching the Karbonn Agnee 3G voice-enabled Tablet, we are launching a similar one with a 10-inch screen," said Devsare. “With the proposed fund, we plan to expand research and development, widen the brand image and have value-added products.”

According to CyberMedia Research, Karbonn Tablets were eight per cent of the total shipments of a million tablets in the fourth quarter of calendar year 2012. Samsung led with 20 per cent, followed by Micromax at 15.7 per cent.

Experts say this is the a right time for handset makers to explore fundraising. Prashant Singhal, partner, Ernst & Young, said” "A major consolidation is already taking place in the handset industry in India and a few makers had shut shop in the recent past. Hence, there is a significant growth potential for the remaining local makers who are strengthening their presence in the smartphones and tablets sector."

Following the revival in the PE market, other home-grown handset makers are also exploring fundraising. According to media reports, Micromax Informatics is reviving its plan for an Initial Public Offer. It is backed by PE funds such as Sequoia Capital, Sandstone Capital and Madison India Capital.

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First Published: Sat, April 13 2013. 21:41 IST