The investment would value Micromax, an unlisted provider of affordable smartphones that competes with South Korea's Samsung Electronics Co, at around $5 billion, the people said. They did not want to be named because the talks aren't public.
Based outside New Delhi, the company entered the Indian mobile handset market in 2008 and is credited with fuelling the rise of smartphones in the country.
In February, research firm Canalys said Micromax overtook Samsung as the leading supplier in India's booming smartphone market in the last three months of 2014, although Samsung challenged the report.
One of the people said a deal would likely involve the sale of some 20 percent of Micromax by existing investors, raising $800 million to $1 billion. Micromax, controlled by its founders, counts private equity firms Sequoia Capital and TA Associates among its investors.
Micromax had filed for a public listing in 2010, but shelved those plans citing poor market conditions. The sources said the stake sale and partial exit of investors could lead to a U.S. listing in the next couple of years.
Micromax declined to comment. A SoftBank spokesman in Tokyo declined to comment.
SoftBank has set lofty goals for investment in India, with chief executive Masayoshi Son saying it will invest about $10 billion in the country's ecommerce sector after it took a strategic stake in online marketplace Snapdeal.
Affordable smartphones and internet connections are driving the country's ecommerce boom and India is the third biggest smartphone market in the world. Low-priced smartphones are the top sellers in the country.
© Thomson Reuters 2015