One of the leading Indian mobile manufacturing companies, LAVA Mobiles, is currently facing a severe cash crunch. According to reports, the condition is so severe that the company has failed to pay the salaries of its employees for November.
The reason attributed to the slump of the company includes heavy discounting offered by Chinese companies in the Indian market and demonetisation, Mint reported. Moreover, poor sales have resulted in cash flow problems which eventually affects Lava's sales and supplies as well.
In a letter addressed to its employees at its Noida-based headquarters, Lava Mobiles chairman Hari Om Rai informed that the salaries for November will be delayed and paid in two parts. He added that the payment to the suppliers has also not been made in full.
"Our suppliers had to struggle due to late payments or fewer payments. In last nine years at Lava or in my entire business journey of 26 years, none of the companies I have associated with has ever delayed the salaries to its people, but at this junction, we had no other option but to delay the salaries too. Employees of the E band will be paid 60 percent of the salary and above E band will be paid 40 percent of the salaries on 1 December. The balance will be paid on or before 20th December," the letter read.
The crisis for the Indian mobile manufacturing companies has been looming for a long time. The entry of the Chinese mobile companies in the Indian market dented the profits of the homegrown players. Riding on new technology and deep discounting, these companies ate up the shares of its Indian competitors.
The smartphone sales numbers for the September quarter shows that three companies in the top five are Chinese. Xiaomi is dominating the market with a market share of 27.3 per cent followed by Samsung (22.6 per cent), Vivo (10.5 per cent), Micromax (6.9 per cent) and OPPO (6.7 per cent).