 "Vivo becomes third brand to exit Germany")
Chinese smartphone maker Vivo is set to open one of India’s largest mobile phone manufacturing plants in Greater Noida next month. This facility will boast an annual production capacity of 120 million devices, set up with an investment exceeding Rs 3,000 crore, according to The Economic Times.
Earlier Vivo had discussions with the Tata Group, the Murugappa Group, and Indian contract manufacturer Dixon Technologies regarding a potential joint venture. However, negotiations have stalled due to disagreements over valuation. Consequently, the company is now actively seeking a local joint venture partner in India to manage its manufacturing operations, the report cited sources as saying.
Recently, the company moved out of its leased manufacturing facility that had an annual capacity of 40 million devices. This plant has now been acquired by Bhagwati Enterprises, the manufacturing unit of Micromax Informatics.
Vivo’s new facility spans 170 acres in Greater Noida and has an annual manufacturing capacity of 120 million units.
Dixon Technologies: A potential JV partner
Indicating a potential joint venture, the news report quoted sources at Dixon as saying that the company is in the early stages of discussions with Vivo. Dixon is reportedly exploring a potential agreement similar to the one it made with Transsion for Vivo’s manufacturing operations.
In April, Dixon announced its plan to acquire a majority stake in Ismartu India, a manufacturing unit owned by Chinese phone maker Transsion Holdings. Dixon disclosed plans to initially purchase a 50.10 per cent stake in Ismartu India for Rs 238.36 crore in cash, with a future aim to increase its ownership to around 55 per cent, the report said.
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The transaction is expected to be finalised by FY27.
The report quoted sources as saying that Vivo had been in discussions with several Indian companies for several months. However, they were unable to reach an agreement due to disagreements over valuation, management control, and other issues.
The company’s valuation must be determined by an independent third party, and there cannot be a forced sale of shares at a discounted price, considering the significant investments the company has made in the Indian market so far, another source said, as quoted by the report.
Tata Group in talks to acquire stake in Vivo
Tata Group is in advanced discussions to acquire a majority stake in the Indian division of Vivo. The negotiations are currently focused on finalising the valuation.
India-China joint venture
The Indian government may grant approval for joint ventures between Indian and Chinese companies under the condition that the Indian partner holds a majority stake of at least 51 per cent in the local unit.
In 2020, amid tensions along the India-China border, the government implemented stringent regulations requiring companies from neighbouring countries sharing a border with India to obtain clearance from the government before investing. This policy had delayed several potential projects. However, there appears to be a shift in the government’s approach, as it now shows willingness to facilitate these collaborative ventures while ensuring India’s interests are safeguarded.
ED files money laundering case against Vivo
The Chinese smartphone manufacturer is also under regulatory scrutiny from the government. Vivo is currently under investigation by the Enforcement Directorate (ED) in connection with a case under the Prevention of Money Laundering Act (PMLA). The ED has alleged that Vivo may have defrauded the government of India, leading the probe agency to register a money laundering case on February 3, 2022.
The ED has alleged that Vivo had unlawfully transferred Rs 62,476 crore to China in order to avoid payment of taxes in India.
