Ratan Tata
Cyrus Mistry, in his letter, had blamed Ratan Tata for all the wrong foreign strategies taken up by the firm. Pictured: Ratan TataReuters

Chinese handset-maker Xiaomi's India plans got a further boost, as Ratan Tata, chairman Emeritus of Tata Sons, buys stake in the company, and the deal also marks first Indian investment in the world's third largest smartphone manufacturer.

"Mr. Tata is one of the most well-respected business leaders in the world. An investment by him is an affirmation of the strategy we have undertaken in India so far," Lei Jun, founder and chief executive officer of Xiaomi, told The Economic Times.

However, the company did not disclose the amount invested by the Tata Group's former chief, who has recently shown a strong interest in start-ups such as Paytm, Snapdeal, Urban Ladder, Bluestone and CarDekho.

Xiaomi, which raised an investment of $1.1 billion last year, said he would also act as an advisor to the company.

"We will be looking at him as a key advisor for us, so we can go to him from time to time and seek his advice on how do we truly build a truly Indian company. We can't think of a better advisor than him," said Manu Jain, head of Xiaomi's India operations.

Founded in 2010, Xiaomi witnessed rapid growth to emerge as the top smartphone vendor in China, the world's second largest smartphone market.

Valued at about $45 billion, Xiaomi is regarded the most valuable start-up globally. The company's smartphone shipments tripled to over 61.1 million units last year with revenues seeing a two-fold increase.

The company launched Mi4i smartphone in India last week, making it the first handset to be unveiled outside China. The Mi 4i model that supports six Indian languages is priced at ₹12,999.

Entering the Indian market in July 2014, Xiaomi has been intensifying its efforts to replicate its success at home in the country and recently disclosed its plans to set up local manufacturing unit including R&D centre. By doing so, the company aims to become top mobile manufacturer in the country.

"The most important market for us in 2015 is India. We want to become an Indian company. So, we want to build an R&D team, manufacture phones, set up data centre in India and invest in ecosystem companies in India," Jun said.

The company is witnessing a fast growth since its arrival in India posing a stiff competition to country's second largest handset manufacturer Micromax.

On other hand, Micromax is swiftly exploring ways to defend its market share amid growing threats from rivals such as Xiaomi and and Motorola.

Micromax recently announced its plans to offer flash sales, an approach followed by Xiaomi to boost sales.