Seqouia Capital and Sandstone Capital LLC have led the pre-IPO investment round of $43 million into Micromax Informatics Limited, a leading domestic mobile handset company. Madison India Capital--a mid-market private equity firm focused on media, communications and business services with a typical investment appetite of $5 million-$15 million--also participated in this round of funding. 

Sources close to the development told VCCircle, the three PE firms have picked up a combined stake of less than 10%. Mohit Bhatnagar, Managing Director, Sequoia Capital, will join the board of the company.

This is the second round of institutional money getting into the company. Earlier this year, US-based PE firm TA Associates infused $45 million (Rs 204 crore) in Micromax valuing the company a little above Rs 1,000 crore. Naveen Wadhra, Director, TA Associates India is one of the board members of Micromax Informatics.

Lexygen and Goodwin Procter provided legal counsel to TA Associates. Grant Thornton served as financial advisor and Indus Law provided legal counsel to Micromax. Amarchand & Mangaldas & Suresh A. Shroff & Co. provided legal counsel to Sequoia Capital and Sandstone Capital.

The telecom company which started as a developer of embedded software and e-commerce solutions in 2002, and entered the mobile handset market in 2008, has registered a phenomenal growth in the burgeoning domestic mobile market with its current market share by revenue at 4.1%.

In a total of domestic mobile handset manufacturers standing at 14% last year, Micromax garnered the largest share with 4.1% followed by  Spice and Karbonn had a share of 3.9% and 3% in FY 2009-10, said the V&D100 Indian Telecom Survey conducted by CyberMedia Telecom journal Voice & Data.

The company recently announced the launch of Micromax C350, the first Indian Open Market Handset (OMH) for CDMA phones. It also cashed in on the huge success of the QWERTY keypad on a mobile handset that it introduced designed to speed up texting. It also introduced dual SIM technology into India. The mobile handset maker is focusing on Tier II and III cities besides smaller towns and rural areas. It company is headquartered in New Delhi and has a presence in 23 states in India and has expanded its sales network internationally in Nepal, Sri Lanka and Bangladesh. 

The Indian wireless market is one of the fastest growing in the world with 10 to 15 million new mobile subscribers per month, says a research by Macquarie Research and Grant Thornton. The number of subscribers has grown from approximately 100 million in 2006, to more than 400 million today and is expected to grow to over 800 million over the next three years.

The company has essentially been leveraging the tarrif arbitrage phenomena, with its dual SIM phones but global mobile makers manufacturing dual sets can pose a serious competition to the domestic hand-set makers, pointed an analyst. "Nokia is finally launching a dual SIM phone (something that is clearly missing in its portfolio now) by October 2010, and this could be a huge risk to all these home-grown mobile phone companies which are harping for growth on the dual SIM product portfolio”, said an analyst with a Mumbai based broking firm. 

There are other domestic mobile handset makers who are looking to raise money to ramp up their expansion plans. Lemon Mobiles, a mobile brand promoted by Fast Track Communications, is also looking to raise capital to fund a $100 million (over Rs 460 crore) investment in India over the next three years.

The company claims that it is already amongst the top 10 handset manufacturers in the country and aims to be amongst the top five within the next two years. Others like Spice Mobile have earlier said that it will merge with parent company Spice Televentures as part of a plan to consolidate the group's telecom business and raise money by selling treasury stock in the market to raise Rs 300 crores.

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