With the $7.2 billion deal between Microsoft and Nokia is set to be closed in the coming days, the Finnish company is running out of time to resolve the tax issue in India. An Economic Times report now claims that Nokia could end up leaving the Chennai plant out of the Microsoft deal in order to close it. Such a move will not only affect the financial details of the deal, but also add a level of uncertainty to the future of 8,000 plant employees.
In December last year, the Delhi HC had finally given Nokia a go ahead to sell the Chennai plant to Microsoft, once it would pay the Rs 2,250 crore tax liability. Nokia on its part had offered to pay the liability as well as an extra Rs 700 crore in installments to free the plant. It was also ready to submit Rs 3,500 crore bank guarantee, which covered the amount it had transferred to its parent as dividend. But negotiations stalled, when Nokia refused to provide another bank guarantee that would cover any potential future tax liabilities. Last month the Supreme Court ordered Nokia to submit a concrete plan and settle the tax row. With the Microsoft deal also close to completion, Nokia is running out of time.
The recent reports about Nokia offering voluntary retirement schemes to its employees at the Chennai plant is actually seen as a way to scale down operations. It is not possible for Nokia to sell the plant to any other company either and the only other option seems to be leaving the plant out of the Microsoft deal and eventually shutting it down. But the Chennai plant being Nokia’s biggest manufacturing plant, leaving it out could affect the deal’s worth.
ET contacted Nokia who replied saying, “Post the Supreme Court order, we are still evaluating our options for the Chennai factory. We would not speculate on the future.”