Nokia unit revival may breathe new life into TN electronics sector: sources

With the tax dispute over Nokia’s plant in Chennai having been settled, the unit is back in the market for acquisition. According to government officials, Taiwanese contract electronic manufacturer Foxconn is the frontrunner for the revival of the facility.

Media reports quoting government officials in Delhi stated that India and Finland have reached an accord on the tax dispute with Nokia under the Mutual Agreement Procedure (MAP), clearing the way for the sale of the company’s Chennai plant. This involves a payment of Rs 16 billion, a sum Nokia deposited with the government in March.

When contacted, Tamil Nadu government officials said they were not aware of the development, even while confirming that Foxconn has shown interest in acquiring the Nokia plant, which was once the Finland-based mobile maker’s largest. Foxconn already has operations in the state, and has also recently set up a manufacturing unit for Chinese brand Xiaomi in Tamil Nadu.

“Foxconn is interested in reviving the Nokia plant. It is Nokia’s neighbour and is already doing a lot of contract manufacturing for global electronic majors. It will be fit and appropriate if Foxconn is able to resume operations in the plant,” said an official. The Taiwanese firm is in touch with the State government and is taking steps for the revival.

“This would mean more employment in Tamil Nadu. Electronic hardware manufacturing jobs would get a major boost and the state government will support Foxconn’s efforts in revive the facility,” said senior official from the State government.

Industry sources Foxconn had submitted a preliminary proposal to revive Nokia facility at Sriperumbudur, which was shut in 2014 causing more than 15,000 direct employees to lose their jobs. While companies including HTC and Essar had shown interest in the facility earlier, they did not pursue the matter, the sources added.

An email sent to Foxconn’s India head Josh Foulger did not elicit a response immediately.

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

Earlier, Nokia and the I-T department told the court that a report has been received from Ernst and Young India Pvt Ltd (EY) on valuation of the company’s assets. EY was appointed by the court as the valuer for Nokia India’s Chennai mobile plant and its other assets.

As per the report, the assets were valued at Rs 3.6 billion if they were to be sold as a ‘going concern’ (where the company is not bankrupt) and Rs 4.17 billion on a ‘non going concern’ (where it has gone bankrupt), they said.

Earlier the company told the Delhi High Court that the buyer had offered it Rs 4 billion for the assets.

The Income Tax department has frozen Nokia’s assets in connection with a tax dispute over an estimated Rs 230 billion, following which the state government has also slapped a tax demand notice for around Rs 24 billion. The factory in Tamil Nadu was one of the largest manufacturing facilities for mobile phones in the world.

The tax dispute also led its new owner, global software major Microsoft which acquired Nokia’s global devices and services business including assets in India for $7.2 billion on April 25, 2015, to keep the facility out of its plans.

Operations at the Nokia unit, which employed over 30,000 employees directly and indirectly, came to a grinding halt following a clampdown by the Income Tax department over the Rs 230 billion dispute. Following this, the Finnish company, which had in between sold the mobile handset business to Microsoft, suspended operations in the facility in November 2014. After Nokia closed, almost all the ancillary companies including Foxconn stopped operations in the SEZ.