After nearly six years, the doors of Nokia's Chennai plant, shut due to a tax dispute, are expected to reopen as Finland-based Salcomp, one of Apple’s major suppliers, has agreed to buy the unit for around $30 million (Rs 215 crore).
The factory has been shut since 2014 after a dispute between the Finnish mobile handset maker and tax authorities.
Confirming that the company had reached an agreement with Salcomp for the sale of its facility in Sriperumbudur, Chennai, a Nokia spokesperson said the firm was hopeful of "continuing" support from the authoritities in securing the necessary clearances to complete the sale.
Salcomp is expected to begin operations at the plant by next year, and is likely to invest around $300 million over the next five years. Nearly 10,000 people are expected to get jobs once the factory goes full steam.
The factory, once the largest Nokia mobile manufacturing unit worldwide, was shut in 2014 and some 15,000 direct employees have lost jobs. Earlier, HTC, Foxconn and Essar had evinced interest in the unit but did not pursue the matter.
The Nokia Manufacturing facility, which employed over 30,000 employees directly and indirectly, was freezed by the Income Tax department following a Rs 210-billion income tax dispute. Following this the Finnish company, which sold the mobile handset business to Microsoft in between, suspended operations at the unit in November 2014. After the Nokia unit was shut, almost all the ancilliary companies, including Foxconn stopped operations in the SEZ.
Global software major Microsoft had acquired Nokia's global devices and services business, including assets in India, for $7.2 billion in April 2015; however, due to the tax dispute, it had to take the facility off its plans.
Last April, Nokia resolved the tax dispute with the Indian government by settling $241.4 million towards IT Department tax claim.
Bloomberg had, at that time, reported that as part of the agreement, Nokia would pay the government $241.4 million to settle the ongoing tax dispute out of court in a move that would bring the five-year-old tax dispute over an original $602.3 million tax demand to a mutual agreement procedure--a dispute resolution provision offered in the tax treaty between India and Finland.
The one-time settlement that was provided under the India-Finland double tax avoidance agreement is a marked departure from the Indian tax authority's pattern of drawing foreign multinationals such as Alphabet Inc's Google and Vodafone Group Plc into protracted litigation over large tax demands.
Nokia's deal with the tax authorities paved the way for clearing the sale of its factory to Finland-based Salcomp, a global leader in the mobile phone charger market. Salcomp has, in fact, been present in India with a facility in Chennai for several years now. The company was supplying to Nokia phones when its manufacturing facility in Sriperumbudur was up and running. But when the Nokia facility shut down a few years ago, Salcomp maintained production at its own unit and also started manufacturing at two more plants in India.
During his last visit, Salcomp’s President and CEO Markku Hangasjärvi told Business Standard that India accounts for 15-20 per cent of company's total sales, and he certainly expected to raise that to about 20-25 per cent by 2020. By 2025, it would be even higher. The company invested over Rs 200 crore in India during the past few years and plans are to at least double, if not triple, that amount by 2020, depending on the risks and returns of the business.