Lava to raise Rs 193 crore from Chinese firm
, ET Bureau|
Updated: Dec 04, 2017, 12.45 AM IST
NEW DELHI: Lava is raising $30 million (about Rs 193 crore) from an affiliate of state-backed Chinese technology group Tsinghua Holdings, a first move by an Indian handset maker to raise capital in a tough market amid increasing competition from Chinese rivals. The Noida-based company has issued five lakh compulsory convertible preference shares to Hong Kong-based UNIC Memory Technology, an affiliate of Tsinghua Holdings, for the fund-raising, according to company documents filed with the Registrar of Companies (ROC), which were seen by ET.
“Consent of the members of the company is hereby accorded to the board of directors to issue and offer 5,00,000 of compulsory convertible preference shares (CCPS) collectively for the INR equivalent of $30 million, each with the face value of Rs 100, and remaining amounts per CCPS being apportioned towards premium, on a preferential basis to UNIC Memory Technology,” the company said in the filing.
The company plans to invest the funds in local handset design and manufacturing capabilities, people aware of the matter said. Lava, which has been displaced from its position among leading smartphone makers by Chinese rivals such as Xiaomi, Oppo and Vivo, is investing in mobile phone design including setting up a mobile phone design centre in India.
The company also plans to ramp up its existing manufacturing units and adding two units by investing Rs 2,615 crore, to increase the overall production capacity to 216 million units per year, in the next eight years. ET’s queries sent to Lava International and Tsinghua Holdings did not elicit any comments till late evening on Sunday.
“Lava has been working on this for a considerable time now. However, the recent upside down in the market conditions, especially this year for the Indian brands in general and Lava specifically, would make any investor think twice before putting in their money,” said Faisal Kawoosa, research director at Cybermedia Research. Lava has been trying to raise $100 million for more than two years.
“By raising (money) through CCPS, it seems Lava does not see this as the right time to go public, at least for some more time, and got in an investor with some assurances through this instrument,” Kawoosa said. The fund-raising marks the second such instance of an Indian handset company partnering with a Chinese entity.
“Consent of the members of the company is hereby accorded to the board of directors to issue and offer 5,00,000 of compulsory convertible preference shares (CCPS) collectively for the INR equivalent of $30 million, each with the face value of Rs 100, and remaining amounts per CCPS being apportioned towards premium, on a preferential basis to UNIC Memory Technology,” the company said in the filing.
The company plans to invest the funds in local handset design and manufacturing capabilities, people aware of the matter said. Lava, which has been displaced from its position among leading smartphone makers by Chinese rivals such as Xiaomi, Oppo and Vivo, is investing in mobile phone design including setting up a mobile phone design centre in India.
The company also plans to ramp up its existing manufacturing units and adding two units by investing Rs 2,615 crore, to increase the overall production capacity to 216 million units per year, in the next eight years. ET’s queries sent to Lava International and Tsinghua Holdings did not elicit any comments till late evening on Sunday.
“Lava has been working on this for a considerable time now. However, the recent upside down in the market conditions, especially this year for the Indian brands in general and Lava specifically, would make any investor think twice before putting in their money,” said Faisal Kawoosa, research director at Cybermedia Research. Lava has been trying to raise $100 million for more than two years.
“By raising (money) through CCPS, it seems Lava does not see this as the right time to go public, at least for some more time, and got in an investor with some assurances through this instrument,” Kawoosa said. The fund-raising marks the second such instance of an Indian handset company partnering with a Chinese entity.
