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Xiaomi's Latest IPO Puts the World on Vibration Mode

Updated on May 17, 2018
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Xiaomi, a brand well known for its cutting edge phones specifically designed for the everyday man, has filed for an ingenuous Hong Kong Initial Public Offering (IPO).

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Xiaomi's growth

Xiaomi is now one of the world’s leading smartphone manufacturing companies. Although, no surprises there because the company was hailed as the most valuable startup in the world upon its creation, a feat not achieved by many. In fact, it has been on some sort of a conquering spree ever since it launched its first smartphone in August 2011, winning over China by 2014 before moving to Singapore and India in the same year.

In India, it initially sold 95% of its products online, but within a year it managed to open 24 offline stores across the country, reducing its online sale to 80%. The company has further planned to open at least a 100 major offline stores in the country by the end of 2018 and is also working on increasing its manufacturing units.

Currently the 5th largest smartphone manufacturing company in the world, Xiaomi also manufactures a wide range of internet connected home appliances, like air purifiers and rice cookers. It keeps you connected, well fed and healthy.

Need for IPO

However, Xiaomi is not just about being a clever package, it has also proved to be a dark horse when it comes to its astute IPO plans that have helped it morph into a giant presence in the technological market of the 21st century.

Xiaomi, reported a net loss of 43.9 billion yuan ($6.9 billion) in 2017, however, its revenue surged 67.5 percent to 114.5 billion yuan ($18 billion) last year.

As the technical market of the world is developing rapidly, the competition within the market is also growing with leaps and bounds. This competition is mainly centred on the most novel and latest technologies being implemented in the launched gadgets, keeping in mind the budget of all sections of the society. However, to do so the main requirement for any company is budget and for that modern ventures rely heavily on IPOs.

The public listing could raise $10 billion for the company with the overall valuation of the company at up to $100 billion and would be the biggest Chinese tech IPO since Alibaba Group Holding Ltd raised $21.8 billion in 2014.

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Advantages

The main advantages Xiaomi will get through this process are:

  • It will raise capital.
  • It will help the company to expand its offline stores and increase its range of products.
  • It will enable the company to invest more in tech startups.
  • It will also add lustre to the company's prestige and public image.

Disadvantages

With all the advantages, the company may also face certain disadvantages while going for an IPO, which are:

  • The company will need to increase its accounting and marketing costs.
  • It will have to disclose its business and financial information to the public which may help the competitors.
  • Loss of autonomous control over company due to new shareholders.
  • More effort and time will be required to manage the company after the IPO goes into effect.
  • While depending on others, the company may even face the risk of funds not being raised.

Planning to minimize possible losses

However, with apt planning these losses can be minimized. The schemes are:

  • The company can establish anti-takeover plans through which the shareholders will not be able to take over the company.
  • It can have good management and a sound financial team, so that its information available in the public domain does not give much opportunity to the competitors.
  • Its corporate governance should be deft to reduce the risk of fund raising.

Xiaomi's Sponsors

Xiaomi ‘s IPO will be sponsored by Morgan Stanley, CLSA, Deutsche Bank AG, Goldman Sachs Group Inc. and Credit Suisse Group AG.

Conclusion

Xiaomi's smartphones have been winning hearts in Asia ever since its launch. The relatively cost effective smartphones laden with fabulous up to date features have efficaciously made Xiaomi one of the most go to brands in Asia. With the company's IPO plans, it will be able to come up with more state of the art smartphones, which will in turn posit a wider choice in front of the customers.The company will also be able to launch various other products in the Indian market, which it has already done in the Chinese market, like TVs, laptops, etc. Due to this IPO plan, the company will release more products, which will increase competition in the market, thereby, eventually reducing cost and benefitting the customers.

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