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India's Ratan Tata takes slice of phone maker Xiaomi

The Tata name carries significant weight in India, and having the business leader on Xiaomi's side could help the Chinese company gain more traction in the country.

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Xiaomi CEO says the investment from Ratan Tata (above) "is an affirmation of the strategy we have undertaken in India so far." Harold Cunningham/Getty Images

One of the most prominent businesspeople in India now owns a small stake in one of the hottest smartphone makers in the world.

Ratan Tata, chairman emeritus of Tata Sons, the holding company for India-based conglomerate Tata Group, has made an investment in Xiaomi, the China-based handset maker announced Monday. Terms of the deal were not disclosed, but Xiaomi closed a $1.1 billion funding round in December at a $45 billion valuation. Given the valuation, it's unlikely that Tata's investment was sizable enough to give him a large equity stake in the company.

"Xiaomi is one of the fastest-growing companies in the world," Ratan Tata said in a statement. "It has brought its innovative business model and high-quality products to India with huge success."

His investment could be more important from a public relations perspective than from a cash perspective. Indeed, Xiaomi founder and CEO Lei Jun eschewed all mention of what the company would do with the cash, saying instead that Tata's investment "is an affirmation of the strategy we have undertaken in India so far."

Last week, Xiaomi unveiled a flagship smartphone for India, called the Mi 4i. The device, which comes with a 5-inch screen and octa-core processor, is widely viewed as a key first step in Xiaomi's self-professed plan to become the most dominant smartphone maker in the emerging India market. At the end of the fourth quarter, Xiaomi was ranked the fifth-largest smartphone maker in India. Samsung was tops.

The Tata name carries significant weight in India, and having Ratan Tata on Xiaomi's side could help the company and its smartphone gain more traction in the country.

Tata Group, which had $103.3 billion in revenue last year, is a massive conglomerate. The company, which has over 581,000 employees, competes in a range of industries, including communications, technology, engineering, steel and chemicals. It's one of the most well-known companies in India and a prominent player in several industries globally.

India is a crucial country for nearly all handset makers. It has a fast-growing middle class and is adopting technology at a rapid rate. With the potential to target hundreds of millions of people, India represents a massive opportunity for all companies, including those like Xiaomi that have been successful in emerging markets where there is an appetite for higher-end devices priced at a level that budget-conscious shoppers would find appealing.

Even before the Tata announcement was made, Xiaomi attracted customers to its Mi 4i. Xiaomi said in a statement Monday that over 225,000 India customers have registered to buy the Mi 4i. The device launched last week, but due to excessive demand for its products, Xiaomi often uses a registration model to provide customers products on a first-come, first-serve basis.

Whatever the company is doing, it's working. Xiaomi said in January that its pre-tax sales in 2014 topped 74.3 billion yuan ($12.1 billion), up 135 percent from 2013. Xiaomi sold 61 million handsets in 2014, an increase of 227 percent compared to the prior year. Xiaomi is now the third-largest smartphone maker in the world behind Apple and Samsung, despite only selling to a relatively small number of markets, including China, Indonesia and India.