The Tatas have closed down operations of TataFone, the telephone handsets manufacturing business, as part of a restructuring exercise.
Sources close to the Tata group said: "The operations had become unviable, and business economics did not permit carrying on with the division. It was operating with cash losses."
They added: "Manufacturing of telephones does not seem to have significant upsides and cheap imports were eating into the margins of the business."
The division was part of Tata Telecom, but when the company decided to focus entirely on telecommunications software, the telephone handsets business was spun off into a separate company, Itel Industries, a subsidiary of Tata Industries. Tata Industries was also looking for a buyer for the business but found no takers.
"We had approached the Kerala government to take over the operations for free, but they also declined. We are currently in talks with the labour commissioner to work out the package to be offered to the employees," the sources said.
The telephone handsets manufacturing business was originally taken over from Keltron, a Kerala government electronics outfit.
Itel Industries' manufacturing facility is located at Palakkad, Kerala. As a group policy, the Tatas have chosen to stay out of IT and telecom related hardware manufacturing.As a result, over the last three years, the group has got out of companies such as Tata Lucent and Tata IBM.