Apple's Billion-Plus Business in India: Hidden in Plain Sight, Yet "Just Out of Reach" For Most

A Quick "Primer" on India and its Smartphone Market

Here's what a casual observer of smartphones and technology might know or readily find out about India:

• India has a population of about 1.32 billion, looking very much set to exceed the population of China (1.38B or so) before long. (Source: Google, citing World Bank and the US Census Bureau)

• According to World Bank, India has a per-capita income of roughly $1,700 USD (sharply uptrending over time), compared to roughly $8,100 USD in China (also sharply uptrending)

• In calendar Q3 2017, according to Canalys, smartphone quarterly unit sales topped 40 million for the very first time. Interestingly, Canalys estimated that roughly 75% of the India smartphone market that quarter was dominated not by domestic OEMs such as Micromax, but by Samsung(~25%total market share), followed closely behind by Xiaomi, and then the three OEMs of Oppo, Vivo (Oppo's corporate cousin, both of whom are subsidiaries of BBK Electronics), and Lenovo/Motorola in roughly equal shares. In other words, Samsung is the current volume leader in India, and 3-4 Chinese OEMs, depending on how you count Oppo and Vivo, combined for a dominant 50% or so of India's smartphone shipments in CQ3 2017.

India's average smartphone selling price is slightly under $160 as of CQ2 2017, which represents an uptrend thanks to the deployment of 4G, which you might have heard Tim Cook mention from time to time in earnings calls while dropping mostly "obscure", yet mostly bullish-sounding, hints about how Apple's doing in India.

And what about Apple in India?

Thanks to the apparent requirements of India law, there's considerably more information available on Apple's India financials than many may think. Simultaneously, bureaucratic quirks grant Apple's Indian subsidiary a significant amount of "protection" from inquiring minds...outside of India.

So what I'll do this post is:

1) Tell you a few tidbits of information I've very recently learned about the very much public but relatively unknown entity known as Apple India Private Limited;

2) Let you know what the probably-reliable latest annual Apple India financial data points are, with a dash of context courtesy of Tim Cook and Luca Maestri from a recent earnings call; and finally,

3) "Show you the front door" of India's Ministry of Corporate Affairs (MCA), an apparent India counterpart of the U.S. SEC where certain of Apple's ostensibly-required India filings are ostensibly readily available...provided you meet one of two requirements that I don't.


Apple India Private Limited - Slightly Less Private Than the Name Implies

Apple's presumably wholly-owned India subsidiary was founded in January 1996 - several months before Apple made the business recovery move of a lifetime and acquired NeXT, and with it, a certain Steven Paul Jobs.

Information publicly accessible without registration via the India Ministry of Corporate Affairs,

Information publicly accessible without registration via the India Ministry of Corporate Affairs,

If you've ever had a complaint or support issue as an Apple customer in India, the existence of Apple India Private Limited is actually very, VERY common knowledge. A quick visit to https://www.apple.com/in/contact/ lists the exact same Concorde Tower address.

By the way, notice that "CIN" in both images? We'll get to that in the final section of this post. For now, let's have a look at one of the lesser-known Apple data points - annual revenues in India.


A Few Credible-Seeming, Albeit Second-Hand, Financial Data Points From Apple's "European" Subsidiary

"Wait, I check Apple Investor Relations and stuff regularly, and Apple doesn't report India revenue to shareholders, analysts, media, anybody!"

This is true, and it's as totally understandable as it is savvy. And until very recently, I would have guessed that most large multinational corporations with operations in India would never tip their hand about how they're doing in India unless required to by very specific conditions, such as deriving more than 10% of total revenue from one particular foreign country. (Source: Google Books, citing Ernst & Young)

Now, I'm not so sure that's the case.

With the caveat that this information is, for the moment, second-hand (I'll get to why later), here's what's known about Apple's India business, which Apple has cleverly included within the revenue geography of Europe. The basics have been covered enough in the India business press that I can collate all the sources into one chart (not to worry, I've cited all source links within the chart itself).

As you can see, Apple India Private Limited (which I'll call "AIPL" for short) is a relatively known quantity in India, even if coverage seems fairly scant elsewhere. Among the possible reasons for the outside-of-India obscurity? While India is a theoretically enormous market opportunity for domestic and multinational smartphone players alike (refer back to the "primer" section), it hasn't been all that "significant" a market for $200B+ scale Apple Inc. until fairly recently. And since India is seen as a price-conscious smartphone market...well...you can guess the rest.

In case you're on a smartphone and can't really make out much of the above chart at first glance, I'll explain some elements of it for those unfamiliar with the scale or numbers.

• The currency, known in ForEx terms as "INR", is India's rupee. What might be less familiar is the "Crore", which is a unit of 10 million rupees - obviously, a better scale of measurement for larger companies.

• At present, one Crore is around $156,000 USD, meaning Apple's India operations (as presumably entirely represented by AIPL, more or less) generated around $1.8B USD of sales in the fiscal period from April 1, 2016 through March 31, 2017. Yes, that's roughly six months earlier than Apple Inc.'s fiscal year ends.

• Those really small orange bars on the chart (hopefully you can see the data labels clearly enough) represent AIPL's net income - and since they're using the same scale as revenues, yes, they've been extremely modest, albeit consistently positive for at least FY 2010 through 2016. As AIPL didn't actually report its FY 2017 results until just this month, it may be some time until an India media source reports on and includes the profitability data.

• Oh, and about this dataset - I'd love to provide more information than just revenues and net income, but without going down a third-party paid service rabbit hole, that's all I can collate and still aggregate a reasonably complete picture. I can tell you, again second-hand, that AIPL reportedly classifies its revenue as "iOS" and "non-iOS" (guess which category dominates, and "non-iOS" doesn't count) - and on the expense side of the ledger, the category "purchases of stock in trade" is also dominant...although it doesn't sound quite like "cost of goods sold", allowing that customary accounting categories in the US and the India may differ. (Note: I'm absolutely, most definitely not an accountant.) Then again, Apple only started actual India manufacture of iPhone (SE) in May 2017, the beginning of AIPL's fiscal 2018.

• Why didn't I convert INR to USD? The rupee has been very volatile against the US dollar until fairly recently, so I decided constant currency was a far better way to present data, versus hopelessly trying to extrapolate some kind of "ForEx conversion average per year", as I'm confident you'll agree based on the USD/INR chart (chart generated via Investing.com):

Yup, a bit volatile. In case you're wondering, no endorsement implied or anything, I just chose the investing.com version of the USD/INR ForEx chart, which you can easily customize, generate and share, simply because of those exact attributes.

Yup, a bit volatile. In case you're wondering, no endorsement implied or anything, I just chose the investing.com version of the USD/INR ForEx chart, which you can easily customize, generate and share, simply because of those exact attributes.

Apple's Always Reportedly "Troubled", Including in India...

Returning quickly to the revs/net income chart, there's been two recent reports from India. One having to do with the imposition of increased import duties on items such as smartphones, in an obvious attempt by the government (whether you deem it smart/sound policy or not) to "encourage" multinationals into joining its "Made in India" domestic manufacturing initiative. As a result, Apple reportedly raised iPhone prices by an average of 3.5%.

The second, insinuated by the Economic Times to be related, is the reported resignation of Sanjay Kaul, the reported executive in charge of AIPL, on account of the subsidiary's "slowest growth in 5 years." The article, which is the only reportage on AIPL's FY 2017 I found, is generally dour in tone on account of AIPL's year-to-year annual revenue growth of maybe 16% or so, slower than any previous year, possibly to only get worse, and so on and so forth.

...Or Is It? Bonus Indirect AIPL Context Courtesy of Tim Cook and Luca Maestri

The Dec. 19, 2017 article, by the way, mentions AIPL's "slowing growth" from the standpoint of AIPL's fiscal year ending March 31, 2017 (as far as I can tell, AIPL doesn't, and has absolutely no desire to 😂, report financial information more frequently than annually), and oddly omits any mention of AIPL's net income.

It's all a bit curious, because while iPhone 8 and iPhone X are very pricey, particularly in India, Tim Cook and Luca Maestri have remained upbeat on India whenever the country's mentioned in conference calls. One reason for optimism - Apple's intentionally vague, yet indisputably significant, earnings call disclosure that FQ4 2017 (more or less CQ3 2017) saw India's quarterly revenues double year-on-year. (Which the same Economic Times journalist reported on last month, strangely enough.)

Now, sure, doubling from a "relatively small" revenue base in the hundreds of millions per quarter might be considered "easy" and "not unexpected" in a growth market - but that statistic, even accounting for seasonality, also tends to seriously undercut a stance of excessive bearishness in the region. After all, 100% revenue growth in one full quarter can only help an annual growth expectation in the low double digits. Also of note, while Apple's business in India is nowhere close to its other "troubled" (heh) $40B-scale mega-revenue center in Greater China, it is solidly in $1B+ sales territory, and very close to breaking the $2B annual run-rate barrier.

Furthermore, while a 3-4% or so increase in iPhone pricing thanks to the higher import duty won't do demand any favors, it's actually a minimal price hike relative to, say, what happened in Russia back in December 2014, where a very weak and unstable ruble valuation caused Apple to increase the then-base-model 16GB iPhone 6 flagship price by a whopping 35%.

Last but not least, Luca Maestri noted that iPad (unit sales?) grew 39% year-on-year in India for Apple Inc.'s FQ4 [Apple FQ4 2017 Earnings Call, 19:00]. Combine all this with the "inevitability" of Services revenue growing as the iPhone, iPad and maybe Mac userbase in India grows, and perhaps AIPL stands a reasonable chance of maintaining or improving on its admittedly tepid 16% FY 2017 year-on-year growth rate once AIPL's fiscal 2018 ends.


Where to Find Apple India Private Limited's Annual Filings

Finally, the answer to the two questions, "where can I find AIPL's financial data?" and "why didn't you primary-source this information?"

AIPL files its annual balance sheet information, among other documents, with India's Ministry of Corporate Affairs (MCA), an apparent India counterpart of the U.S. SEC. Among the ways to look up AIPL online is that CIN (Company Identification Number) I mentioned earlier in the post.

Publicly accessible without any registration required. Looking good so far...

Publicly accessible without any registration required. Looking good so far...

Once there, it's easy to find an index of, say, AIPL annual filings dating back as far as 2006.

" Stay on target..." Hey, that new Star Wars installment just premiered, so why not.

"Stay on target..." Hey, that new Star Wars installment just premiered, so why not.

And there they are! A document filed Dec. 6, 2017 and one filed Dec. 12, 2017! A simple matter to download them both and find what we need...

Not so fast, member of the general public!

Not so fast, member of the general public!

Long story short, one might be able to register for the mca.gov.in portal, but in order to access these documents, it seems there is quite literally a price to pay. Now, it's a very modest access charge/cost-recovery fee of around $1.50 USD, but the formidable barrier for non-India residents is the matter of paying that bill. As best as I can tell, a credit card payment from an ICICI bankcard, an online payment drawn from an India bank, or taking a trip to India to visit the appropriate Registrar of Companies location (and then take in the sights and culture right afterward, of course) are among the only viable ways to access these records.

Should anyone reading this happen to live in or have contacts in India willing to download this public-yet-paywalled information once a year, that's certainly one way to get a closer look at AIPL financials (hint hint). Sadly, I don't have any immediate plans to travel to India. (Hmm, is my passport even up to date? I'd better check.)

In the meantime, though, what's out there (and it seems to have been accurately reported) paints a fairly useful picture, all things considered. And when the available data is viewed in what I humbly submit is proper context, it shows a very intriguing market opportunity that may well be, as Tim Cook put it, more than a little similar to where China was several years ago.[1]



[1] I'd caution not to interpret Tim Cook's bullishness on India as any indication that he expects India to be (a) remotely close to (b) where Greater China is now revenue-wise (c) anytime soon. I imagine Cook would say the same. After all, as he - and now we - know, $1.8B is a very, very, long way away from $40B-scale, to say nothing of Greater China's staggeringly high $58.7B revenue peak set in Apple Inc.'s FY 2015.