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Indian Express
18 hours ago
- Business
- Indian Express
India's PLI scheme for electronics components: Is it a new growth chapter for EMS stocks?
India's electronics manufacturing sector (EMS) is entering the next phase of growth. Following the success of the 2020 Product Linked Incentive (PLI) scheme for electronics, the government is focusing on developing the electronics supply chain. On March 28, the Union Cabinet approved a Rs 23,000 crore PLI scheme for electronics components manufacturing. Several EMS players that experienced exponential growth over the past five years are now looking at backward integration strategies to sustain their high valuations. Among them are Dixon Technologies and Kaynes Technology India. However, the two stocks fell 28% and 47%, respectively, in the first three months of 2025 as a temporary slowdown in revenue and earnings made investors cautious. These stocks were trading at over 200x price-to-earnings (P/E) ratio as of January 3, 2025. Such stretched valuations prompted several analysts to downgrade their ratings despite the firms' strong revenue and earnings growth. Several developments unfolded during the fourth quarter of FY25. Investors and industry were anticipating the launch of a new PLI scheme or high-budget outlays for electronics components and semiconductors. However, uncertainty over the rollout of the new PLI scheme, combined with the existing electronics PLI nearing the end and no signs of any extension, led to investor unease. Meanwhile, Dixon and Kaynes started investing in manufacturing capacities to build electronics components. All these factors pulled down EMS stocks. The situation improved after the March 28 approval of the new Electronics Components Manufacturing Scheme (ECMS). However, market sentiment remained cautious due to concerns around potential retaliatory tariffs from the US under President Donald Trump. Hence, when retaliatory tariffs were paused for 90 days on April 8, the share price of Dixon and Kaynes jumped 32% in two weeks. The 2020 PLI for large-scale electronics manufacturing made India the second-largest mobile phone manufacturer in the world in FY 2025. According to a PIB press release on March 26, the scheme attracted a cumulative investment of Rs 10,905 crore, a cumulative production of Rs 7.16 lakh crore, and cumulative exports of Rs 3.9 lakh crore as of February 2025. Apple's contract manufacturers (Foxconn, Tata Electronics, and Pegatron), Samsung, and Dixon were the biggest beneficiaries as they opened facilities and produced Made in India mobile phones. The 5-year PLI scheme helped them set up manufacturing capabilities. While the scheme will end next year, PLI incentives account for a small portion of the profits. Despite domestic electronics production jumping from Rs 5.54 lakh crore to Rs 9.52 lakh crore in FY21-FY25, India does not make phones from scratch. Most components are imported from the US and other countries, assembled in India's over 300 manufacturing units, and used domestically and for exports. Hence, the materials cost of Dixon and Kaynes accounted for 89% and 70% of their revenue in FY25. However, these companies grew exponentially on the back of strong volumes. With the sector maturing, they ought to look for the next growth driver, and a promising alternative is electronics components, which they import. The Electronics Industries Association of India (ELCINA) highlighted that non-semiconductor electronics components constitute 60% of the total cost of finished products. The new ECMS PLI scheme will give EMS companies the boost they need to build electronics components in India and reduce their reliance on imports. The new scheme will give incentives based on turnover, investments in factories, and job creation. Like the 2020 PLI, the 2025 ECMS PLI will be open to both domestic and international stakeholders and is expected to attract Rs 59,350 crore in investment, generate Rs 4.56 lakh crore in production, and create 91,600 direct jobs. While it is too early to gauge the value the ECMS PLI will bring to India's electronics manufacturing sector, we can keep a watch on the possible beneficiaries. Apple's contractors, Samsung, and Dixon got a boost from the 2020 PLI, and now they are self-sufficient to make smartphones profitably and stay competitive. Apple is at the forefront of building a supply chain in India. Its manufacturing contractor, Foxconn, has announced plans to invest $1.5 billion in a display module plant in India. Meanwhile, Dixon is building a display module plant for mobile phones, laptops, and TVs it manufactures, and later expand to cater to external market requirements. It is also looking to apply for the new PLI scheme to manufacture camera modules, mechanical enclosures, and lithium-ion batteries, and use them in the electronics it makes for end clients. Dixon Technologies has been rapidly growing in the smartphone space, with its mobile and other EMS divisions' revenue up 203% to Rs 33,043 crore in FY25. It now accounts for 85% of the company's revenue. Dixon manufactures smartphones for Motorola, Xiaomi, Oppo, Realme, Vivo, Transsion, and Nothing. According to the company's CEO and Managing Director, Atul Lall, Dixon plans to double smartphone production from 28.3 million in FY25 to 40-44 million in FY26 and 60-65 million by FY27, and export a significant portion to North America. To achieve this target, the company is constructing a one-million-square-foot facility in Noida. With the 2020 PLI scheme coming to an end, Dixon will lose production incentives and could see a temporary slowdown in margins. It is likely to make up for it by taking a higher share of customers' wallets, new customer additions, and margin expansion through operational efficiencies and backward integration. Dixon has ventured into laptop manufacturing for HP, ASUS, and Lenovo. However, the volumes are yet to pick up, and investors have already priced in high growth. The stock trades at a 116x P/E ratio, which is supported by its high return on equity (ROE) of 33% and a 110% growth in profit. While laptops are a good business, their volumes may not be as high as smartphones. However, electronics components and display modules could help Dixon reduce material costs and supply chain risk. A push to higher margins could bring more upside, but share price growth would be moderate because of stretched valuations. Dixon Technologies Revised Price Target (Rs) Previous Price Target (Rs) Upside Potential from Market Price Rs 14,849 Ratings Nomura 21,202 22,005 42.8% Buy Motilal Oswal 20,500 38.1% Buy CLSA 19,000 28.0% Buy Anand Rathi 18,775 26.4% Buy BNP Paribas 17,910 20.6% Buy Yes Securities 15,741 16,566 6.0% Reduce JM Financial 15,650 16,500 5.4% Hold Source: Brokerage Reports
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Business Standard
4 days ago
- Business
- Business Standard
Union cabinet approves Rs 3,653 cr 4-lane Badvel-Nellore highway in Andhra
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the development of a 4-lane highway between Badvel and Nellore in Andhra Pradesh at a total cost of Rs 3,653.10 crore. The 108.13 km project will connect Badvel-Gopavaram Village (NH-67) to Guruvindapudi (NH-16) and enhance infrastructure and industrial linkages in the state, according to a release statement. According to the official statement, the greenfield corridor will improve access to key industrial nodes in Andhra Pradesh and reduce the travel distance to Krishnapatnam Port by 33.9 km, from 142 km to 108.13 km. The Cabinet approved the project on Wednesday, and it is expected to generate over 43 lakh man-days of employment, including 20 lakh direct and 23 lakh indirect man-days. As per the statement, Union Minister for Civil Aviation Ram Mohan Naidu met Prime Minister Narendra Modi in Patna on Thursday and conveyed his gratitude for the Cabinet's decision. "This decision reflects the Prime Minister's unwavering commitment to Andhra Pradesh's development and the vision of empowering states through world-class infrastructure," said Minister Ram Mohan Naidu. The Minister also apprised the Prime Minister of a major political development from the Telugu Desam Party's annual Mahanadu convention, held on Tuesday. At the event, the TDP, under the leadership of Andhra Pradesh Chief Minister N. Chandrababu Naidu, unanimously passed a political resolution backing Operation Sindoor and reaffirming its support to PM Modi's leadership. The statement said that this resolution, introduced by Union Minister Ram Mohan Naidu himself at Mahanadu, reflects the TDP's strong alignment with the prime minister's national vision. Minister Ram Mohan Naidu formally communicated this resolution to PM Modi today during his meeting in Patna, assuring the full and unwavering support of the people and government of Andhra Pradesh.
Hans India
5 days ago
- Business
- Hans India
CM Naidu Thanks PM Modi, Nitin Gadkari for Approving Badvel–Nellore Highway Project
The Union Cabinet has approved building a four-lane highway between Badvel and Nellore in Andhra Pradesh. After this news, Chief Minister N Chandrababu Naidu thanked Prime Minister Narendra Modi and Union Minister Nitin Gadkari. The Cabinet Committee on Economic Affairs (CCEA), led by PM Modi, approved the project. The highway will be 109 kilometers long and will cost about ₹3,653 crore. The highway will be built using the Design-Build-Finance-Operate-Transfer (DBFOT) model, said the government's press office. On Wednesday, Naidu said the new road will: Improve travel and connectivity in the region Make the infrastructure stronger Help the economy grow Provide more job opportunities to young people, especially in rural areas PM Modi also praised the project in a post on X (Twitter). He said it will help Andhra Pradesh develop faster. One big benefit of the highway is that it will shorten the distance to Krishnapatnam Port in Nellore district. Right now, the trip is 142 kilometers. After the highway is built, it will be only 108 kilometers. This means the journey will be 34 kilometers shorter and faster than the current busy road. This project is an important step to improve roads, travel, and the economy in Andhra Pradesh.
India Today
5 days ago
- Business
- India Today
Highway linking central, eastern Andhra approved, Chandrababu Naidu thanks PM
Following the Union Cabinet's approval of the Badvel-Nellore Corridor project, Andhra Pradesh Chief Minister N Chandrababu Naidu extended his heartfelt gratitude to Prime Minister Narendra Modi and Union Road Transport Minister Nitin Cabinet Committee on Economic Affairs, chaired by PM Modi, sanctioned the construction of the four-lane highway connecting Badvel in central Andhra Pradesh and Nellore, in the eastern part of the over 109 km, the project has an estimated cost of Rs 3,653 crore and will be executed on the Design-Build-Finance-Operate-Transfer model, as per a release from the Press Information Bureau. 'The approval of the 4-lane Badvel-Nellore Corridor by the Union Cabinet is a major step forward in our state's growth,' said Naidu in a post on social media platform X, expressing gratitude for the Centre's support in fast-tracking the project. On Wednesday, Naidu remarked that the four-lane corridor would enhance regional connectivity and play a crucial role in advancing the state's economy, strengthening its infrastructure, and empowering the youth across various districts and rural Modi, too, acknowledged the project's significance in a post on X. 'The 4-Lane Badvel-Nellore Corridor, whose construction has been approved by the Cabinet will benefit the development journey of Andhra Pradesh and generate several opportunities for the youth of the state,' he wrote in the post.A major highlight of the proposed corridor lies in its strategic logistical value. As per official data, the new alignment is expected to shorten the travel distance to Krishnapatnam Port located in the city of Thamminapatnam, Nellore district, Andhra Pradesh by 34 km, bringing it down from 142 km to 108 km, offering a faster alternative to the existing Badvel-Nellore route, which often suffers from heavy traffic by Rahen Philip IN THIS STORY#Andhra Pradesh
New Indian Express
5 days ago
- Business
- New Indian Express
Increased MSP for Kharif crops
NEW DELHI: The Union Cabinet on Wednesday approved a hike in the Minimum Support Price (MSP) for the 2025-26 Kharif season and extended the interest subvention scheme for farmers. It also approved two multi-tracking railway projects in Maharashtra and Madhya Pradesh, as well as a four-lane highway project in Andhra Pradesh. The Cabinet approved a hike in paddy MSP by three percent or Rs 69 per quintal to Rs 2,369 for the 2025-26 Kharif season and up to nine percent rise in rates of pulses and oilseeds, according to Union Minister Ashwini Vaishnaw. The cost to the exchequer of the MSP decision is Rs 2,07,000 crore, and continuation of the subvention scheme will cost Rs 15,642 crore. The announcement comes amid the southwest monsoon reaching earlier than usual, giving a boost to the sowing of kharif crops, which contribute over 50 per cent of India's total annual foodgrain production. Under the Modified Interest Subvention Scheme (MISS) for 2025-26, farmers will continue to receive short-term credit at an affordable rate through the Kisan Credit Card (KCC). The continuation of the scheme will cost exchequer Rs 15,640 crore, the Minister said. Under MISS, farmers get short-term loans of up to Rs 3 lakh through KCC at a subsidised interest rate of 7 percent, with 1.5 percent interest subvention provided to eligible lending institutions. Additionally, farmers who repay loans promptly are eligible for an incentive of up to 3 percent as the Prompt Repayment Incentive (PRI), effectively reducing their interest rate on KCC loans to 4 percent.
