Xiaomi announced its plan to raise $4.7 billion through initial public offering on Hong Kong Stock Exchange in June. The company officially started trading in July and has been part of volatile trade since its debut. While the Chinese smartphone maker netted a large volume of interest, its stock price dropped below the IPO level twice due to its business model.
Now, Xiaomi says it will use large chunk of capital raised through IPO to expand its India operations. The company says it will use the money to build its ecosystem of internet services in the country. Manu Jain, Xiaomi’s India head plans to use the capital to make more startup investments and build India-specific IoT devices.
Xiaomi’s success in the markets like India has been mainly driven by budget and entry-level models but with new funds, Xiaomi plans to break into the premium smartphone segment as well. In the past, Xiaomi has launched premium devices in the form of Mi MIX 2 but success has been limited for the smartphone maker. “Some part of the global expansion money will be spent in India,” Jain told ET.
Xiaomi plans to spend 30 percent of the $4.5 billion raised in the IPO last month for core R&D, 30 per cent on building the IoT platform, 30 per cent for global expansion and the remaining 10 per cent for miscellaneous expenses. “We have had a great journey for smartphones, powerbanks and for Mi.com in India, but we can do a lot more on internet services, startup investments and building IoT devices that are India specific,” Jain added.
Xiaomi India chief says that the business does not need significant external investment since it was a profitable business already. While the business is profitable, Xiaomi has been found to be vulnerable to new competition from brands like Huawei’s Honor and the market leader Samsung. With smartphone sales reaching a plateau, Xiaomi is looking to expand its reach into other segments like internet-connected devices and software services.
Watch: Xiaomi Mi MIX 2S First Look Video
As part of its host of internet services in the country, Xiaomi has been building apps such as MiMusic, MiBrowser, Mi Store and Mi Drop and has also started offering credit up to Rs 1 lakh with MiCredit. It has also invested in 10 startups in India as part of its expansion into internet services. Its investments include Sharechat, Hungama and lending startup Krazybee.
Manu Jain says that the company will continue its push for Mi.com, which has emerged as the fourth largest retail platform in the country. Xiaomi was recently dethroned by Samsung to regain the leadership in India’s growing smartphone market. After report from Counterpoint Research, industry analysts started questioning Xiaomi’s business model. For long term growth, Xiaomi needs India but it need not rely on its smartphones alone to make revenue.