Those with knowledge of the situation indicated that the Tata Group is paying $750 million in total, inclusive of debt, for the acquisition of Wistron’s manufacturing facilities. This will make the company the first in India to produce iPhones. On Wednesday, they both signed the takeover agreement, they claimed.
According to the aforementioned individuals, Tata was only supposed to pay the equity portion of the $125 million that was promised in the October 27 plan. According to them, the target company has additional term debt of $75–80 million, which will now be transferred to the purchaser. In addition, the parent company has offered Wistron India an inter-corporate loan of $550 million. To obtain the specifics that had not before been published, ET spoke with numerous individuals involved in the situation as well as other knowledgeable parties.
The Taiwanese parent firm injected the $550 million inter-corporate loan into its Indian branch as an unsecured working capital loan against receivables from Apple, the company whose goods were being manufactured by the vendor at the 14,000–15,000 employee Kolar plant. Tata Electronics Pvt Ltd (TEPL), which owns a manufacturing facility in Hosur, Tamil Nadu, is taking over the local Wistron factory.
A fully owned subsidiary of Tata Sons is TEPL
Banks will refinance the facility on Tata’s behalf in a process known as receivable financing, or “factoring,” given Apple’s stellar credentials. It’s thought that Citi, who advised the deal alongside AZB, is spearheading this endeavour as well. Usually, banks sell these loans to peers and other financial institutions through syndication or sell-down.
ET did not receive a response from Tata or Wistron.
On November 30 of last year, ET was the first to reveal that TEPL, one of Apple’s Indian component suppliers, had begun talks with Wistron to acquire its factories. Wistron, together with Foxconn and Pegatron, is one of the top three Apple vendors in India.
According to minister of state for electronics and information technology Rajeev Chandrasekhar, the acquisition of Wistron is anticipated to ignite the next wave of investment in the Indian electronics manufacturing ecosystem and mark the development of the nation’s contract manufacturing businesses, ET reported last week.
“I think Tata’s entry definitely signals that the Indian EMS (electronic manufacturing service) has (now) a giant Indian company which does manufacturing for global brands (in the) present and is maturing now,” he stated.
There are presently four assembly lines used by Wistron to produce iPhones. Three facilities are used for Apple product repairs, with one located in Peenya, Bengaluru, and the other out of commission. By the end of November, the company was scheduled to establish a second manufacturing plant in Kolar, with production starting in January 2024.
An industry executive in the telecom hardware sector stated, “The acquisition of Wistron will help Tata move up the Apple value chain,” under anonymity. Wistron’s current expertise will enable Tata to become the first domestic vendor to produce iPhones. The Tatas were concentrating mostly on producing iPhone shells in the Hosur facility, with only 15-20% of the consumables coming from within the region. That will be a significant advantage.
As per a JPMorgan report, Apple intends to relocate 25% of its iPhone manufacture to India by 2025, with the aim of broadening its manufacturing portfolio, which is presently centred on China.
Taiwan’s Wistron Corp said on October 27 that its board had given the go-ahead for its subsidiaries SMS Infocomm Singapore Pte Ltd and Wistron Hong Kong Ltd to sign a share purchase agreement with TEPL. For an estimated $125 million (about Rs 1,000 crore), its 100% indirect ownership in Wistron Infocomm Manufacturing (India) Pvt Ltd (WMMI) would be sold. Concurrently, SMS InfoComm (Singapore) Pte Ltd declared its intention to convert a $130.26 million debt, inclusive of interest, that WMMI had extended through external commercial borrowing (ECBs) into stock.
In addition to applauding India’s largest business organisation and the premier production-linked incentive (PLI) program, which was launched by the Narendra Modi government to support local manufacturing, Chandrasekhar had tweeted the breaking news.
In an effort to take advantage of geopolitical pressures against China and convince businesses like Apple to relocate their production to other locations in India, N Chandrasekaran, the chairman of Tata Sons, has been promoting the company’s goals to become a scalable mobile phone and component contract maker.