Tata Group eyes majority stake in Vivo India unit; Bhagwati takes over Greater Noida factory

Vivo in talks with Tata

Tata Group is in talks to acquire a majority stake in the Indian unit of Chinese smartphone maker Vivo, which has been seeking local partners following government push to involve domestic companies in its operations, including manufacturing and distribution.

“The discussions have reached an advanced stage where talks began around valuations. Vivo has been seeking a higher valuation than what Tatas are offering. The Tatas are interested in the deal, but nothing has been finalised yet,” a source privy to the matter told Moneycontrol.

Moneycontrol had on April 8 reported that Vivo and Oppo were in talks with Indian players for their local units amid growing scrutiny in the country.

Vivo's manufacturing factory in Greater Noida has been taken over by Bhagwati Products (Micromax), which has begun hiring staff and will soon start producing smartphones for Vivo through its original design manufacturing joint venture with Huaqin. This joint venture between Bhagwati and Huaqin is awaiting approval from the Indian government, sources said.

Huaqin Technology is the world's largest original design manufacturer (ODM) for mobiles, tablets and laptops.

This factory at World Trade Center, Techzone IT Park, was on lease, which has been transferred to Bhagwati, another source said.

Vivo has shifted its manufacturing operations to its new 170-acre factory in Greater Noida, which will be fully operational in the coming days.

Tata Sons and Vivo India didn’t respond to queries sent by Moneycontrol. Bhagwati declined to comment.

The Indian government wants the Indian partner to have a stake of at least 51 percent in a potential joint venture with a Chinese handset company. It also wants the joint venture to have local leadership and local distribution.

Industry executives said this will ensure that domestic companies and executives exert significant influence over the country’s mobile phone industry, which is largely dominated by Chinese handset brands.

Vivo is under investigation for allegedly remitting large amounts of its revenue to its Chinese parent to allegedly avoid paying taxes. The company is also being investigated for alleged violations of the Prevention of Money Laundering Act (PMLA) by the Enforcement Directorate.

Vivo India, reported its second-highest profits at Rs 211 crore on the back of Rs 29,874.90 crore revenue from operations in FY23, compared with Rs 26,971.11 crore in FY22, as per its filings with the Registrar of Companies (RoC). It reported a net loss of Rs 123 crore in FY22.

Vivo and Oppo, the largest brands of China's biggest smartphone manufacturer, BBK Group, recently started appointing Indian distributors in each state as the primary source of product supply for the trade as part of move to localise the distribution structure in India. Both had Chinese-owned and managed distribution companies in each state, referred to as agents. This was also a longstanding point of contention with the Indian government.

BBK companies Oppo, Vivo, Realme, and OnePlus do not have local talent in top decision-making roles.

Tata Group has entered India’s electronics manufacturing space through its subsidiary Tata Electronics. Tata Electronics had last November acquired Taiwanese Wistron's local operations for $125 million (Rs 1,000 crore), becoming the first Indian company to manufacture iPhones. The group is now in talks with another Apple contract manufacturer, Pegatron, to acquire a majority stake in its iPhone manufacturing unit near Chennai.

Additionally, Tata Electronics is reportedly constructing one of India's largest iPhone assembly plants in Hosur, Tamil Nadu. This facility is being set up to align with Apple Inc's strategy to expand its manufacturing footprint in the country. The plant is expected to house around 20 assembly lines and employ approximately 50,000 workers within the next two years, with the site projected to be operational within 12-18 months.

Tata Electronics is also working to internally develop "very sophisticated" and complex high-precision machines used to produce the casing of these iPhones. It has reportedly tied up with two Indian manufacturers to develop these capabilities and plans to export these complex machines in the future. Previously, Tata imported these machines from China.