A little-known Indian company is launching a smartphone on Wednesday believed to be the cheapest in the world, targeting a market already dominated by low-cost handsets.

Set to be priced at under 500 rupees (about £5.10), domestic handset maker Ringing Bells’ Freedom 251 smartphone is about 1% of the price of the latest Apple iPhone.

Ringing Bells was set up in September 2015 and began selling mobile phones via its website a few weeks ago under its Bell brand, a spokeswoman said.

“This is our flagship model and we think it will bring a revolution in the industry,” she told AFP. Ringing Bells currently imports parts from overseas and assembles them in India but plans to make its phones domestically within a year, the spokeswoman added.

Cheap smartphones, many of them Chinese-made, are readily available in the Indian market but domestic competitors are making inroads, with models selling for less than £14.

India is the world’s second-largest mobile market and notched up its billionth mobile phone subscriber in October, according to the country’s telecoms regulator.

But in poorer Indian states such as Bihar, “teledensity” – the penetration of telephone connections for every 100 people – is as low as 54%, with a stark urban-rural divide.