Vivo, a leading Chinese smartphone maker, is on the verge of finalizing the sale of one of its manufacturing facilities in Greater Noida to Bhagwati Products Ltd, which is associated with the Indian brand Micromax. This move comes as Vivo experiences heightened regulatory scrutiny.
In the financial year 2023, Vivo achieved an impressive revenue milestone of approximately Rs 30,000 crore, positioning itself at the top of the charts in the Indian smartphone market for the January-March quarter. Despite its success, the company is choosing to part with its initial property, a wide expanse covering 14 acres.
The prospective buyers, Bhagwati Products, intend to continue making smartphones at the facility. They are planning a production collaboration with Huaqin, an original design manufacturer allied with Vivo. This partnership is expected to contribute substantially to India’s ‘Make in India’ initiative by fostering the localization of smartphone manufacturing for international entities.
Vivo’s sale includes a larger, recently built factory on a 169-acre territory, involving investments surpassing Rs 5,000 crore. Relinquishing its older site is aligned with Vivo’s strategy to benefit from the Indian government’s production-linked incentive (PLI) program for the mobile manufacturing sector.
Through this deal, Bhagwati Products is set to obtain a part of these incentives, which will be shared with Vivo as part of the manufacturing arrangement. Vivo and Bhagwati Products have both reached out to India’s Ministry of Electronics and Information Technology seeking approval for this transaction.
Although the process is still in its infancy, and specifics are scant, Rajesh Agarwal, Director at Bhagwati Products, confirmed that the necessary governmental consents are being pursued. However, he remained tight-lipped on the finer details of the deal. Inquiries directed to Vivo did not elicit a response.
Important Questions & Answers:
1. Why is Vivo selling its factory in Greater Noida?
Vivo is offloading its factory in Greater Noida amid increased regulatory scrutiny, which may involve a strategic decision to consolidate its manufacturing operations or to comply with government regulations.
2. Who is purchasing Vivo’s factory?
The factory is being purchased by Bhagwati Products Ltd, which is associated with Indian smartphone brand Micromax.
3. How will this sale impact Vivo’s operations in India?
The impact on Vivo’s operations is likely related to its alignment with the Indian government’s production-linked incentive program and may result in an optimization of its manufacturing strategy within India.
Key Challenges & Controversies:
– Regulatory Scrutiny: Vivo is under heightened regulatory scrutiny, which can be a challenge as it may affect the brand’s image and operational freedom in India.
– Approval Process: Gaining the necessary approvals from the Ministry of Electronics and Information Technology might present difficulties and could delay or impact the terms of the deal.
Advantages & Disadvantages:
Advantages:
– For Vivo: Aligning with the PLI scheme might improve profitability and efficiency in Vivo’s operations.
– For Bhagwati Products: Acquiring the facility could allow Bhagwati Products to enhance its manufacturing capabilities and benefit from the PLI scheme.
– For India: This deal might foster the localization of smartphone manufacturing, supporting the ‘Make in India’ initiative.
Disadvantages:
– Operational Risk: Vivo might face operational risks by changing its manufacturing strategy, which could affect its supply chain.
– Regulatory Risk: Both parties might encounter regulatory risks if the government changes policy or if there are delays in the approval of the deal.
If you are interested in more information about the companies involved, please visit their official websites:
– Vivo Official Website
– Micromax Official Website
Please note that checking for the latest information and updates regarding the regulatory situation, manufacturing developments, and the finalization of the business transaction between Vivo and Bhagwati Products is essential to fully understand the context and implications of the deal.