Nokia’s infamous Chennai-based factory might not become a part of its buyout deal with Microsoft. The $7.2 billion deal will close later this month, but the company is yet to resolve its ongoing tax disputes in India. Considering how big the factory is, if Nokia isn’t able to sort it out with the Indian government, this could affect the original terms of the deal and the future of the 8,000 person staff it employees.
The Finnish giant agreed to pay Rs 2250 crore, and an additional 700 crore in installments to the Indian government. Nokia nodded positively to an Rs 3,500 crore bank guarantee as well. However, the company declined to agree that it will pay unspecified potential future tax liabilities.
"The writing is on the wall. They (Nokia) have no other option," but to leave the plant out of the deal for now, a person close to the developments in Nokia told The Economic Times, requesting anonymity due to the sensitivity of the matter.
The employees of the plant are scared of their future. While Nokia has offered a retirement scheme to the workers, but as many claim, Nokia is apparently forcing them to take the VRS and leave the company. Yesterday, the head of the Chennai plant, Prakash Katama, quit his job.
While the Microsoft-Nokia deal has received approval from China, the U.S. Department of Justice, the European Commission, and others, the company is yet to get the approval from other authorities, and sort out the rest of the things before the deal closes.
ET contacted a Nokia representative, who said "post the Supreme Court order, we are still evaluating our options for the Chennai factory. We would not speculate on the future".
Legal experts believe that leaving out Nokia’s plant might actually help to push the deal forward. "This could be a plausible option for Nokia," said Sanjay Sanghvi, a partner at law firm Khaitan & Co.