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Nokia plant in Chennai may find buyer after settlement of tax dispute

Foxconn is frontrunner is the race for acquisition and revival of the facility; state to support efforts as it will boost manufacturing jobs in TN

T E Narasimhan & Gireesh Babu  |  Chennai 

According to state government officials, Taiwanese contract electronic manufacturer Foxconn is the front runner for revival of the facility
According to state government officials, Taiwanese contract electronic manufacturer Foxconn is the front runner for revival of the facility

With the reported settlement of the tax dispute over the former manufacturing unit of Finnish telecom giant at Sriperumbudur, near here, the plant is expected to be back in the market for potential acquisition.

According to state government officials, Taiwanese contract is the front runner for revival of the facility.

Media reports quoting government officials in Delhi state the governments of India and Finland have reached an accord on the tax dispute with under the Mutual Agreement Procedure (MAP), clearing the way for the sale of the Chennai plant. This involves a payment of Rs 16 billion, a sum deposited with the government by last month.

“We are hopeful of resolving the issue relatively soon in cooperation with the authorities in India,” said an official from Nokia in response to an email seeking confirmation of the development.

When asked, Tamil Nadu government officials said they were not aware of the development but that Foxconn had shown interest in acquiring the plant, once the largest for Nokia. Foxconn already has operations in the state; it recently set up manufacturing operations for Chinese brand Xiaomi.

“Foxconn is interested in reviving the Nokia plant. It is their neighbour and they already have a lot of contract manufacturing operations for global electronic majors. It will be fit and appropriate if they are able to resume operations in the plant,” said an official.

“This would mean more employment to Tamil Nadu. The government will support Foxconn to revive it,” said a senior official from the state government.

The unit was shut in 2014 and 15,000 direct employees lost jobs. Earlier, HTC and Essar were among which had showed interest in the facility but they did not pursue the matter.

An email from Business Standard to Foxconn’s India head Josh Foulger did not get a reply.

“Earlier this year, Nokia engaged with a buyer interested in purchasing production machinery. Subsequently, we worked with the respective authorities and secured the necessary permissions for executing the sale of those specific production machinery,” said the Nokia official, adding that the company remains open to discussions on the sale of the remaining assets including the Nokia building unit, and hopes for similar support from the authorities should the company find a suitable buyer.

Some former employees said they would like to rejoin if the salary package was at par with industry standards.

“I have started a business but all my experience is in mobile manufacturing and I am doing something different now. Not many have settled but are doing one or the other job. After all, it has been almost four years,” said Divakar from Vellore district, one of the last few employees to accept the severance package offered by Nokia’s management in 2014-15.

“We are still fighting with the managements for the employees. They are still suffering. If the facility is revived, the previous employees should be appointed there,” said A Soundrarajan, state president of the Centre of Indian Trade Unions.

“The previous employees should be “reappointed. They are all youngsters and are still suffering,” said M Shanmugam, general secretary of the labour wing of the Dravida Munnetra Kazhagam, the state’s major opposition party.

Consultancy firm EY, following a court direction in 2015, had made an assessment of the plant’s value. Assuming the company went bankrupt, it had estimated its value at Rs 4.17 billion. Nokia India had said at the time that it had a buyer offering Rs 4 billion.

Foxconn also has a tie-up with HMD Global, a Finnish company that currently manufactures the Nokia brand of mobile phones. Reports say Rising Star Mobile India, Foxconn’s India manufacturing arm which has set up a facility at Sri City in Andhra Pradesh, close to Chennai, had bought production machinery from the facility for an undisclosed amount.

The central government’s income tax (I-T) department had put a freeze order on Nokia’s assets in connection with the tax dispute. After this, the state government slapped a tax demand notice for around Rs 24 billion.

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 disputes, it had to keep the facility out of its plans.

The background to the I-T department’s move was a Rs 210-billion dispute. The Finnish company, which had in between sold its mobile handset business to Microsoft, suspended operations at the facility in November 2014. After Nokia closed, almost all the ancilliary to it (Foxconn was one) had stopped operations in the area.

First Published: Sat, April 21 2018. 23:42 IST