Nokia's Chennai plant to be sold off in parts

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Old 16-Dec-2014
Nokia's Chennai plant to be sold off in parts

CHENNAI: The mothballed Sriperumbudur plant of Nokia, once the world's single largest mobile phone-making unit, may be sold in parts. The Finnish company has appointed Hilco, a global leader in handling distressed investment and assets, to take over the machinery and hard utilities. Hilco officials undertook a due diligence at factory last Friday. Nokia suspended production at the facility from November 1.

"They did a complete assessment of the plant and its machinery," sources said. While the value of machinery lying idle inside the plant is not known, sources said that it could be worth close to 54 million euro, including hard utilities like continuous process unit, generators, capacitors, chilling plant and others. "The decision to sell the plant in parts was taken by Nokia as take over the plant by a buyer appears remote due to obsolete machinery and technology. Today, nobody makes Nokia phones and therefore the scope for someone to buy the plant appears remote," sources said.

Efforts to reach Nokia were futile while Hilco, headquartered in UK, could not be reached for a comment.

The factory, assets of which were frozen by the tax authorities, will move to Central Board of Direct Taxes as Nokia had only an operating license after the tahsildar of Kancheepuram attached it due to non-payment of taxes, as ordered by CBDT. For any transactions at the plant, the courts must defreeze the assets. In a global transaction, Nokia announced its sale of handset business, including its Sriperumbudur plant, to Microsoft for 5.4 billion euro last year. The deal deadline of March 31 was extended to April 2014. Several cases and tax disputes surfaced after the deal with Microsoft was announced, and the Sriperumbudur plant was left out of the deal. Nokia ran the plant as a contract manufacturer for Microsoft for one year.

Tax authorities say Nokia violated several tax laws, including transfer pricing laws and permanent establishment liability, which if proven will result in a tax charge in excess of Rs 21,000 crore on the Finnish company. "As of now, the tax authorities have issued demands for Rs 3,080 crore. Of this, Nokia was directed to pay Rs 500 crore by the Delhi high court which the company has paid," sources said.

With Nokia shutting down the plant, its key component supplier Foxconn too has announced suspension of production from December 24.

Along with half a dozen component suppliers, the Nokia SEZ in Sriperumbudur, 40km from Chennai, became a source of employment for more than 31,000 persons directly and countless scores through indirect jobs. Only Salcomp and Light-On-Mobile continue operations inside the SEZ, with Salcomp employing nearly 3,000 persons directly while Ligh-on-Mobile employs around 290 workers.

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