Will Alibaba Group Holding Ltd (BABA) Invest In Micromax Promoters Mull Exit?

India’s largest handset vendor, Micromax, is attracting attention from a number of companies all of whom would wish to buy stakes as the company continues to explore several strategic options. The Economic Times reports that Micromax has been reaching out to Alibaba Group Holding Ltd (NYSE:BABA) as probable investment partner, having bought minority stakes in Chinese handset maker Meizu technology for $590 million.

There are reports that a probable merger with Micromax would allow Alibaba Group Holding Ltd (NYSE:BABA) expand the adoption of its operating system beyond the Chinese borders. The giant e-commerce company has been seeking avenues for expanding the adoption of its homegrown operating system YunOS as it seeks to expand its presence in technology related sectors.

Alibaba Group Holding Ltd (NYSE:BABA) already has investments in India having debuted in the market with a $550 million cheque for leading m-commerce player Paytm. It awaits to be seen if Alibaba would be willing to buy Micromax in entirety as Economic Times reports the company’s promoters are equally open to an outright sale as long as valuation targets are met.

Goldman Sachs Group Inc (NYSE:GS) is reportedly advising Micromax on potential deals that might be forthcoming from the likes of Alibaba Group Holding Ltd (NYSE:BABA) and other interested parties. Meetings overseas with potential suitors have already taken place according to sources. Micromax Promoters are believed to be looking at a valuation in the range of $3-$3.5 billion or as much as 21,000 core. That would be 2.5-2.9 times the company’s 2014 full year net income of $1.1 billion.

A probable transaction in this range from the likes of Alibaba Group Holding Ltd (NYSE:BABA) would be good for investors like TA Associates that owns 15% having come on board five years ago. An outright sell, in this case, will also come on the heels of the dashing of plans for a possible IPO, Micromax having received a number of pitches from investment banks.

Micromax would be a great addition for Alibaba Group Holding Ltd (NYSE:BABA) on the handset front considering it is the undisputed No 2 in the market in India, to Samsung with an estimated 3 million handset sales monthly.

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