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Nokia May Exclude Indian Plant In Microsoft Deal

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Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is having a multitude of tax disputes with Indian authorities and it has been trying hard to resolve these issues. Problems do not seem to be coming to an end for Nokia any time soon and the company is not in a state to spend any more time or resources resolving them. The smartphone maker might have decided not to include its Chennai manufacturing plant in the deal with Microsoft Corporation (NASDAQ:MSFT), says a report from Economic Times, citing people familiar with the matter.

Nokia tries hard to resolve issues

The manufacturing plant at Chennai has 8,000 employees and with this news their future is uncertain. In September 2013, the Nokia-Microsoft deal was announced and within a short time the Tax Authorities placed Nokia under scrutiny.

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is making attempts to free the plant from these issues and it has made a payment of Rs. 700 crore. It has also made an offer to put Rs. 2,250 crore in an escrow account. Nokia has agreed to the instructions by the Delhi High Court to present Rs. 3,500-crore bank guarantee, which covers the amount paid by the Nokia to its parent company. However, Nokia objected to another condition that requires it to submit another bank guarantee from the parent firm covering any potential future tax liabilities. Nokia has already filed an appeal against it in the Supreme Court, which is the top-most judiciary authority in India.

Time running out for Nokia

April is the deadline for the closing of the $7.2 billion deal with Microsoft Corporation (NASDAQ:MSFT), and the issue is not yet solved. The Finnish firm has not disclosed how it is planning to resolve the India dispute. It seems they are left with no other option but to exclude it from the deal until something is sorted.

Recently, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has offered its Chennai employees a voluntary retirement option. This indicates that Nokia is trying to reduce its cash expenses by cutting down on operations. No other player in the market is willing to pay as much for the Chennai plant as Microsoft has agreed to, and therefore, the plant could not be offered to any third party for sale. The other option left for Nokia is to get rid of the issue by shutting it down completely.

It all started when Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) received a notice last month from the Finance Ministry asking the company to pay Rs. 2080 crore as taxes. The income-tax department has accused the company of evading taxes that were imposed on the software downloads on the handsets that were manufactured at the unit under dispute i.e. Sriperumbudur (in Chennai) since 2006.

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Aman Jain
Personal Finance Writer

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