Nokia’s Chennai plant likely to remain out of Microsoft Corporation deal

I-T dept has frozen Nokia?s Indian assets, including Chennai factory, for violating tax norms.

Nokia may have to re-negotiate the $7.2 billion acquisition deal with Microsoft as uncertainty over its Chennai unit persists even as the deadline for the deal nears.

According to a senior tax official, the Chennai unit of Nokia can?t become a part of the buyout by Microsoft given the Supreme Court?s dismissal of Nokia India?s appeal against a Delhi High Court.

The high court had directed parent company, Nokia Finland, to provide a Rs 3,500-crore Letter of Guarantee for future tax liabilities of its Indian unit and deposit Rs 2,250 crore in an escrow account, covering the tax liability demanded by the tax department.

The Chennai unit employees about 30,000 employees. The deal was to be finalised by the end of the first quarter of calender year 2014. Till then, the assets of the plant will remain frozen. Nokia India has agreed to deposit the money in an escrow account.

?Nokia Finland has made it clear to us that it does not want to get involved. They have also made it amply clear that they want to limit their liability to their assets in India. In such a situation, they have no option but to exclude the Chennai unit from the deal for it to go through within the set time frame,? the official said.

Another official, in the know, said that the deal can be consummated in its present form only when the apex court passes its final order. ?If the deal has to go through before the final order, they will need to renegotiate with Microsoft and convince them. Nokia can run the company on contract basis for a limited period till the final SC order,? the official said. Meanwhile, Tamil Nadu state general secretary of Centre of Indian Trade Unions (CITU), A Soundararajan, will meet local management of the company.

?Workers don?t have any idea as to what is happening in the company. Even floor-level management does not know about the situation. There are a lot of issues worrying the employees. They want to know whether Microsoft is taking over, if assets will be disposed off, or if they will have to work for Microsoft. Fate of thousands of workers, contract workers, suppliers is in limbo. Our secretary general in Tamil Nadu is going to meet the local management of Nokia tomorrow to get a clear picture,? AK Padmanabhan, president, CITU, said.

Nokia has already informed the court that if the plant isn?t transferred to Microsoft, it could leave about 30,000 employees out of work. It has, however, maintained that developments in India related to ongoing tax proceedings will not affect the timing of the closing nor the material deal terms of the anticipated transaction between Nokia and Microsoft.

The I-T department had slapped a notice on Nokia?s Indian subsidiary and froze its assets, including the Chennai factory, for violating withholding tax norms since 2006 while making royalty payments to the parent company.

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First published on: 19-03-2014 at 08:30 IST