Vivo Gears Up for Massive Production Plant in India

Preeti Bali / 10:03 am / June 25, 2024

Chinese smartphone giant Vivo is on track to inaugurate one of India’s largest mobile phone manufacturing facilities next month. Located in Greater Noida, the state-of-the-art plant boasts an impressive annual production capacity of 120 million devices and represents an investment exceeding Rs 3,000 crore, according to The Economic Times.

Joint Venture Discussions Stall

Vivo previously explored a potential joint venture with Indian powerhouses like the Tata Group, the Murugappa Group, and contract manufacturer Dixon Technologies. However, these discussions reached an impasse due to disagreements over valuation. Consequently, Vivo is actively seeking a local partner to manage its Indian manufacturing operations.

Vivo Vacates Old Facility

The company recently vacated its leased facility with a 40 million device production capacity. This plant has been acquired by Bhagwati Enterprises, the manufacturing arm of Micromax Informatics.

Dixon Emerges as Potential Partner

Sources at Dixon Technologies hinted at early-stage discussions with Vivo regarding a potential joint venture. The discussions reportedly revolve around a similar agreement Dixon established with Transsion for their manufacturing operations. In April, Dixon announced a plan to acquire a majority stake in Ismartu India, a manufacturing unit owned by Chinese phone maker Transsion Holdings. The initial purchase will grant Dixon a 50.10% stake for Rs 238.36 crore, with plans to eventually increase ownership to around 55%.

Valuation and Control Remain Hurdles

The report suggests that Vivo has been engaged in discussions with various Indian companies for months. However, disagreements over valuation, management control, and other issues have prevented agreements from being finalized. Sources emphasize the need for an independent valuation and the importance of avoiding forced share sales at a discounted price, considering Vivo’s significant investments in the Indian market.

Tata Group Explores Stake Acquisition

The Tata Group is reportedly in advanced discussions to acquire a majority stake in Vivo’s Indian division. The primary focus of these negotiations is finalizing a mutually agreeable valuation.

Navigating the India-China Landscape

The Indian government may consider approving joint ventures between Indian and Chinese companies, provided the Indian partner holds a majority stake (at least 51%). In 2020, stricter regulations were implemented amidst heightened border tensions. These regulations required companies from bordering countries to obtain government approval before investing in India, causing delays in several potential projects. However, a recent shift in the government’s approach suggests a willingness to facilitate these collaborations while prioritizing India’s interests.

Vivo Faces Regulatory Scrutiny

The Chinese smartphone manufacturer is currently under investigation by the Enforcement Directorate (ED) in connection with a money laundering case. The ED alleges that Vivo may have defrauded the Indian government through unlawful transfers of funds to China, potentially evading tax payments. The investigation began in February 2022 under the Prevention of Money Laundering Act (PMLA).

Vivo’s new production plant signifies a major commitment to the Indian market. While a local partner is still being sought, the company appears determined to solidify its presence in the world’s second-largest smartphone market.

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