Private equity firms Sandstone Capital, Sequoia Capital and Madison India Capital have picked up a minority stake of less than 10% in handset maker, Micromax, for about Rs.200 Cr, valuing the company at about Rs.2000 Cr.

The funds raised will be utilised by Micromax for its expansion plans, as it plans to expand its handset business to Africa and Latin America.

Gurgaon-based Micromax Informatics Limited is a domestic handset maker established in 1991.

Transaction Reference: ET

It is planning for an IPO and has hired Citigroup Global Markets, Edelweiss and JPMorgan to be the lead bankers for the public offering to raise Rs.600-800 crore. It will become the first Indian handset maker to go public.

This is the second PE placement in Micromax after TA Associates acquired a minority stake of less than 20% in the company for Rs.225 crore in January this year.

For 2009-10, it posted revenues of Rs.1,600 Cr with a net profit of Rs.150 Cr.

Micromax leads a pack of domestic companies, which includes Karbonn Mobiles, Spice Mobiles, Videocon Industries and Lava International, that have made inroads into the Rs.30,000-crore mobile phone market traditionally dominated by multinationals such as Nokia, Samsung, LG and Motorola.

According to data compiled by research firm IDC, the market share of local companies went up to 17.5% in 2009-end from 0.9% a year ago. Micromax finished December ‘09 as the largest player domestic player with a 4.1% market share followed by Spice and Karbonn, which had a share of 3.9% and 3%, respectively. Nokia’s market share as of December 2009 was 54.1% followed by Samsung with 9.7%.

Sandstone has invested in SKS Microfinance, Tejas Networks and Guruji.com Software.

Madison India Capital is a Mauritius based PE firm, who has a decade of PE experience.

Madison India Capital focuses on investment opportunities Indian media, communications and business services. Madison India Capital's investment ranges from $5 Mn to $20 Mn. It has invested in Net4India in 2009.

Sequoia capital investment portfolio includes companies like Quick Heal Technologies, Druva Software, eClerx Services Ltd, K-12 Techno Services, CARE, Star Health and Allied Insurance and others.

Olive Telecom, a handset maker is also planning to raise funds through PE by diluting minority stake and is in talks with PE firms for the same.

In the telecom space, Tikona Digital raised over Rs.1,110 Cr ($250 Mn) through various instruments; Spice Mobility has planned to raised Rs.300 Cr through sale of treasury shares and One 97 has filed DRHP to raise Rs.120 Cr.

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