Reliance Retail's LYF has a potential to become a $1 billion brand in India, as it is well positioned to benefit from the launch of Jio's 4G services as well as the ongoing smartphone boom in India, according to a CLSA note.
The note added that Reliance Retail's strong distribution network, better brand appeals at entry level, and initial bundling of Jio's 4G services could significantly push LYF handset sales in the country.
The LYF brand emerged as India's fifth largest smartphone player in its first quarter since launch in the world's fastest growing smartphone market which is led by Samsung.
LYF cornered a 7% share of the smartphone market in the first quarter of the year, according to Counterpoint Research.
CLSA however, noted that the surge in LYF's market share could be a result of channel filling, which though highlights an encouraging start.
The brokerage said that the 7% market share of estimated 137 million smartphone sales in the ongoing financial year will result in sales of 10 million units, which could make LYF a $1 billion brand using an average selling price (ASP) of $100.
"This could drive a 31% year-on-year bump to Reliance Retail's FY16 revenue of Rs 216 billion," it added.
LYF shipped around 1.7 million LYF smartphones into India from January to March, trailing No 4 Lenovo-Motorola that secured 8% share, No 3 Intex which had a slightly higher share of 10%. Micromax retained its No. 2 slot in a market led by Samsung.
The LYF smartphone brand is currently sourcing Voice over LTE (VoLTE) ready smartphones from Chinese brands such as ZTE, CK Telecom, Wingtech and Tinno.
CLSA also said that LYF handset sales will also get a boost from the ongoing invite-based offer for Jio's 4G services, which is exclusively for buyers of LYF phones.
"Jio is currently offering its 4G service on an invite basis only if users buy a LYF phone. With users getting three months of free data usage along with a large quota of voice minutes and SMS, the value proposition of LYF phones has been further enhanced," CLSA said.
"This could boost demand at least temporarily ."
Reliance Retail recently expanded its handset range with the launch of two new phones- Flame 2 at Rs 4,799 and Wind 4 at Rs 6,799 - which makes LYF attractively positioned versus competitor models, mainly in the entry segment, CLSA reckons.
LYF now has eight 4G smartphone models ranging from Rs 4,799 (US$70) to Rs19,399 (US$290). The brand also launched a range of Smart TVs and soon plans to enter into mobile accessories.
CLSA said that Reliance plans to build its LYF brand, and it has used cricketers and Bollywood celebrities for marketing. It has also been sponsoring some prestigious events like Lakme Fashion Week and has been trying to create a buzz on social media.
"These may help its brand positioning compared with some other entry-level players. Moreover, Reliance has developed a strong distribution network and has also tied up with key online retailers," the note said.