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Indian smartphone manufacturer Lava to raise $100 million from at least three chip makers: Report

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Lava International Ltd., which makes smartphones under the brand named Lava, is in a process of raising of around $100 million. As per a report from LiveMint, the company is raising fund via forging partnerships.

As per the company’s executive, who was interviewed by LiveMint, the company is going to forge partnerships with chip makers, who will also be investing in the company. Earlier, Lava was planning to raise funding by selling its stake to VC firms.

Hari Om Rai, Chairman of Lava International, said that the company is looking to raise $100 million from three different companies. He further added that the deal will be strategic and not financial. He added:

Strategic means companies who are building components, which are the most core components in our industry. So, we already have a large control on the product in terms of design, supply chain and production. We still want to build more capability there. We are in touch with some chip design companies. Those companies will pick up stake in our company.

As established smartphone makers are taking the route to manufacture their own chips, the chipmakers are now shifting their focus towards the companies in the emerging countries, to get a larger market share in the future.

Hari Rai also seems confident about the company’s survival in the long-run. He believes that Lava will be helped by the consolidation in the industry, which will wipe out smaller companies. According to him, after 10 years, there would be only 10 smartphone brands in India, and he sees Lava among those 10 brands.

Lava has set a target of achieving around 20% market share in India, which is double of its current share of 10%. Giving reason for this target, he said:

We are looking at electronics design and manufacturing in this country. Currently, most of the manufacturing happens in China, but now, we have started to shift it and in a year’s time we will start exporting from here to various countries and that may include China.

Lately, Lava has been focusing more on its expansion outside India. The company has already signed an agreement with Egyptian cosmetics and beauty products maker Easy Group for a joint venture to sell its handsets in Egypt.

Lava, which expects to report revenue of $1.5 billion in 2016-17, plans to start phone shipments in the next four to five months, and will initially sell phones in the $300 bracket. Notably, Egypt is the second largest mobile phone market in Africa, with sales of about 1.5 million handsets a month.

The net sales reported by Lava in the year that ended on 31st March stood at $1.2 billion. It sold 34 million units in the Indian market, of which only about 12 million were assembled in the country.

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