Lava International has dropped out of the race to buy Nokia's Chennai handset factory, once the world's biggest but now non-operational, as the fast-growing home-bred smartphone maker concentrates on developing its own manufacturing facilities in Uttar Pradesh.

According to people aware of the development, a large-scale Chinese manufacturer, which was supposed to partner with Lava International to buy and subsequently operate the Nokia plant, decided to invest in its home market, forcing Lava to change its plans.

These people said Nokia's mobile phone manufacturing plant located in the special economic zone (SEZ) in Sriperambudur, near Chennai, which had a peak capacity to make 15 million feature phones and smartphones a month, was too big for the Noidabased company to buy and operate on its own.

 Executives at Lava International declined comment on the development but confirmed that the company was investing in two plants in Uttar Pradesh—one in Noida's Sector 58, where it will assemble phones, and the other near the Yamuna Expressway. Lava said it has proposed to invest Rs 600 crore in the second plant, and that 25 acre was nearly finalized, but negotiations were on with the state government for more land.

ET had reported in November that Lava was in talks to buy the Nokia plant, a move that could have rekindled the possibility of re-employment of thousands of former workers who were laid off with healthy severance packages. Finland-headquartered Nokia shut its plant on November 1, after a tax dispute between the company and the government prevented the factory from getting transferred to Microsoft as part of a global $7.2-billion deal to sell its devices business. While the tax row is in court, an asset freeze continues on the plant, which had been regarded as a showpiece of India's manufacturing capabilities.

Lava International that sells devices under the Lava and Xolo brands is investing Rs 40 crore in the assembly unit in Noida's Sector 58, where about 2,000 people will be employed, co-founder and Chairman and Managing Director Hari Om Rai said. The company on Wednesday appointed Sanjeev Agarwal as its chief manufacturing officer, who will focus on starting Lava's domestic production while augmenting its manufacturing facilities.

Set up in 2009, Lava is set to cross $1 billion (Rs 6,000 crore) revenue by the end of the current financial year, sharply higher than the Rs 2,909 crore it posted last year. It was the first Indian phone vendor to introduce its own user interface or skin, Hive, riding on the Android OS.

With over 7 per cent share in the smartphone space, in October to December quarter as per three research agencies, Lava is the fourth largest company competing with international and local biggies including Samsung, Micromax, Karbonn, Lenovo-Motorola, Xiaomi and Intex for a position in the top five phone companies in India.

The company, however, claims its market share to be 8.7 per cent and 8.4 per cent for third and fourth quarters, respectively, and added that it imported 2.16 million handsets (including smartphones) in January, as per Cybex Exim, which is the highes.

Source:economictimes.indiatimes.com