• Thu. Feb 29th, 2024

India: OnePlus, Realme, Oppo to go separate ways as parent BBK looks to de-risk Indian business

India: OnePlus, Realme, Oppo to go separate ways as parent BBK looks to de-risk Indian business
China’s largest smartphone maker BBK Electronics Corp has restructured its India operations by making its three main brands Oppo, OnePlus and Realme independent entities with sales on their own books, three senior industry executives said.

The idea, she said, is to de-risk business from current and future government actions against Chinese firms.

BBK transferred sales and distribution of OnePlus and Realme to their respective legal entities OnePlus Technology India and Realme Mobile Telecommunications (India).

Oppo Mobiles India – which until recently handled sales and distribution of all three brands – will continue to sell its namesake brand, executives said.

“The way the government is taking action against Chinese companies, BBK is wary that any tough and subsequent action against Oppo Mobiles India will affect the business of the three big brands,” one of them said. “So, it wants to separate the three businesses.”

Oppo Mobiles India, in its latest regulatory filing with the Registrar of Companies (ROC) in May, said there have been extensive government actions against the company, including the freezing of cash in bank accounts worth Rs 2,082 crore. Its auditors have warned that “a material uncertainty exists that casts significant doubt on the company’s ability to continue as a going concern”, the company said in its RoC filing. It was already known that Oppo Mobiles is under the government lens for being accused of customs duty. 4,388 crore evasion. Oppo Mobiles India also said in the filing that it has received letters of intent from its holding company and its external commercial lender, which will continue to provide financing to the company to ensure its viability.

These RoC filings were made along with the company’s financial report for 2021-22. The company has not made any further filings with the RoC, including the FY23 financial and auditor reports.

Oppo Mobiles India is also changing the way it operates, executives said.

It will now sell directly to large retailers and distributors, while the latter will sell to smaller retailers. Such a pilot ran in Delhi.

Earlier, Oppo mobiles used to be sold to Chinese-owned and operated entities (called agents in industry parlance) in several states, who would sell to retailers.

Oppo Mobiles will continue to manufacture all three smartphone brands.

Executives said OnePlus and Realme are looking to partner with Indian contract manufacturers after requests from the government.

OnePlus Technology India started signing billing, sales and distribution agreements with major retail chains and their distributors from this month, while Realme Mobile Telecommunications started doing the same earlier.

Emails sent to Oppo Mobiles India, OnePlus Technology and Realme Mobile remained unanswered till press time on Monday.

BBK also owns the Vivo and iQoo smartphone brands, which it operates through a separate entity called Vivo Mobile India. Vivo has a dedicated factory in India.

The loss was halved in FY22

Oppo Mobiles India’s May RoC disclosures showed the company’s revenue from operations grew 33.5% to Rs 57,160 crore in 2021-22 and net loss narrowed to Rs 46 crore from Rs 97 crore in FY21. This includes the combined financials of Oppo, OnePlus and Realme sales.

“Oppo’s financial performance gives an initial impression of brilliance, with a 50% reduction in losses and an impressive revenue jump,” said Mohit Yadav, founder, business intelligence firm AltInfo. “However, a deeper examination, involving substantial debt and vendor rebates, reveals a reversed scenario, which raises uncertainty about the company’s future performance in the coming 2-3 financial years.”

Vivo, Realme and Oppo are among the top five smartphone brands in India in terms of market share, while the more premium OnePlus competes with Apple and Samsung in the premium segment.

Oppo Mobiles India said in its latest RoC filing that it has received income tax notices for assessment of previous years’ income, some of which have been complied with, and the company is taking legal route in custom duty evasion cases.

Oppo Mobiles said the company’s auditors have flagged that the company’s liabilities are significantly higher than its total assets, with a negative debt-equity ratio and negative current ratio as of March 2022. The effect is that, taken all together, “a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern”.

Oppo Mobiles has received a letter from its holding company and its external commercial lender that it will continue to finance the company and invest in the form of debt or equity in light of these circumstances. The long and short term cash requirements of the company are met and the company is able to continue its business.

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