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Exclusive | Warburg Pincus in talks to acquire stake in boAt

boAt has sourced parts from China, which it is trying to change by setting up local manfacturing. The China equation, however, is complicated, given 99% of the industry depends on that country and quality at scale is hard to find elsewhere.

December 08, 2020 / 10:10 AM IST

Private equity giant Warburg Pincus is in talks to invest in earphones and wearables brand boAt Lifestyle, as the Delhi-based company rides a wave of online buying and looks to de-link its operations from China amid border tensions, sources have said.

Warburg will likely acquire a 40 percent stake in Imagine Marketing, which runs boAt, valuing it between Rs 1,500 and 1,600 crore, the sources told Moneycontrol.

General Atlantic, another global private equity firm, was interested as well but Warburg is likely to seal the deal in the next few months, sources said.

Warburg and boAt did not respond to detailed queries from Moneycontrol, while General Atlantic declined to comment.

Founded by Sameer Mehta and Aman Gupta in 2016, boAt started by selling earphones primarily on Amazon at rock bottom prices—a strategy that paid off. It then diversified to other audio accessories such as headphones, wireless earphones, speakers and sound bars. Today it also sells power banks and charging cables for smartphones as well as smartwatches.


While it started with earphones priced between Rs 300 and 500, the price range of its products today is Rs 300-Rs 13,000, though the price undercuts the competition in every sector.

boAt has sourced its components from China, where both quality and scale have been available. Contrary to what people think, for something like earphones, China offered bulk production and good quality of suppliers, said a seller of audio gadgets, requesting anonymity. “It is not that the quality is lower. But the downside is that boAt is then seen as a trading business, not manufacturing or a full-stack model, which is riskier and may be less valuable to investors,” the seller said.

The coronavirus pandemic followed by border tensions with China that lead to a deadly clash in June and say a ban on Chinese apps and greater scrutiny of investment from the country have spooked the industry. Players are trying to delink operations from China as much as possible, a hard sell given that 99% of the earphones industry is dependent on China. 

However, boAt has set up a research and development unit and a supply chain team in June, with Prime Minister Narendra Modi talking about local manufacturing as the China standoff continued.

The company has started shifting manufacturing to India and already makes cables but even for those, China provides better quality connectors, the person above added.

“In April and May, when most of India was locked down, boAt spent a lot of time figuring out how to localise manufacturing. De-linking from China is a huge priority for them,” said another person close to the firm.

Though the country began rolling back restrictions in June, customers still flocked to online retailers. In addition, the new norm of working from home and consuming content online also pushed up demand for audio equipment.

“One, a lot of offline demand, which was anyway only 15 percent of their revenue, moved online. Two, the initial sales in June were seen as pent-up demand but that growth has sustained. Three, advertising during the festive season with cricketers such as Hardik Pandya and KL Rahul helped,” the person cited above said.

boAt is expected to clock a revenue of Rs 12,00-1,300 crore for FY21 and an EBITDA, or operating profits of Rs 80-90 crore. EBITDA stands for Earnings Before Interest Taxes Depreciation and Amortization.

According to a recent International Data Corporation report, boAt is now the fifth-largest player in the global wearables market.

For the September quarter, boAt accounted for 2.6 percent of wearable shipments, tying with Google-owned Fitbit. It only trails Xiaomi, Huawei and Samsung.

For Warburg Pincus, a 40 percent stake at a valuation barely 1.2 times the revenue gives it enough control and an entry into the burgeoning audio and wearables market.

boAt has, so far, raised less than $10 million from venture firm Fireside Ventures. It has raised multiple rounds of debt, however, from RBL Bank and venture debt firm InnoVen Capital.

Warburg’s other internet bets in India include auto retailer CarTrade, classifieds firm Quikr, trucking logistics firm Rivigo, ecommerce logistics firm Ecom Express and most recently, Perfios, a fintech startup that collects financial data to help make credit decisions.

Globally, the American PE firm manages $62 billion in assets across a dozen countries.
M. Sriram
first published: Dec 8, 2020 10:07 am
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