Maxx sees bright future in feature phones

At the time when India is being touted as one of the fastest growing smartphone market, Maxx Mobiles is still betting big on feature phones.

Out of the 500 handset models the homegrown company plans to launch in fiscal 2014, 250 will be basic, feature phones, apart from 200 Android-powered smartphones, and 50 tablets, its chairman and managing director Ajay Agarwal said.

So far 50 models have already been launched (15 on August 15), and by next month, Maxx expects to launch another 30.

“It will take at least four years for smartphones to overtake feature phone sales in India, primarily because 35% of users are still not comfortable with touchscreen. Feature phones still make up 80% of handset sales, while out of the remaining 20% smartphones sales, only 5% are active 3G customers and rest 15% use 2G.”

“Even when we look at our own sales margins, maximum handset sales are from the mid Rs5-8,000 category, most of which are feature phones. Smartphone sales are also highest in the lower range, he said.

The company is also looking to start local manufacturing to cater to rising sales and to offset higher import duty on smartphones.

“We will start manufacturing smartphones this month and make 10,000 per month to begin with, and 10,000 per day by April,” Agarwal said.

Agarwal said basic phones will continue to be imported, as the customs duty and national calamity duty (NCD) is 2.34% for mobile handsets priced below Rs2,000 and around 5.55% for above it.

Agarwal, however, said the government has not provided any incentives for local manufacturing.

The recent local handset boom, he said, has more to do with higher margins (due to smaller price differences between local brands and international brands), and consequently increased interest in marketing of local brands by distributors, he said.

“In India, 90% of handsets are sold on emotions and recommendations, so retailers have started stocking more Indian brands. About 99% sales come from retail outlets.

The channel margin (distributor & retailer) for Indian handset brands is 15-18%, much higher than that of international handset brands which is around 6 -8%,” said Agarwal.

On the company’s plans to cross Rs1,000 crore in fiscal 2014 and grow 25% annually, he said, “We take customer feedback very seriously for new phone features, and since the last five years Maxx has launched maximum mobiles, per annum.

We have also slashed our prices by 15%, after lowering our margins by 50%, by means of advertising only for certain models. In addition, we are increasing our service centres from the current 900 to 2,000 by April, 80% of which will be in rural areas.”

However, the company that is expecting a Rs3,000 crore topline in the next three years has no plans to go global just yet.

“We believe India is a big enough market for mobiles,” said Agarwal.