How India’s electronics manufacturers are rewiring strategies

Despite significant revenue growth, the sector has been grappling with thin margins. “Most of the companies will likely continue acquisitions as they look to set up a presence in new markets,” said Harshit Kapadia, vice-president at broking firm Elara Capital.

“These companies are also looking to expand their margins beyond the high-volume industry of electronics assemblies, and the best way to expand margins is by venturing into industrial electronics across sectors—where volumes are low but value-added margins are much higher.”

Dixon Tech

Noida-based Dixon, which reported ₹14,855 crore in revenue in the September quarter, spent ₹803 crore on two acquisitions and a joint venture in the second quarter. It ended Q2 with a 6.2% operating margin, compared to 2.8% a year ago.

The company spent ₹553 crore in stitching a joint venture with Kunshan Q Tech Microelectronics, a China-headquartered firm that makes electronics components. It also invested ₹250 crore to pick up a 74% stake in a joint venture for precision mobile phone and laptop components with Chongqing Yuhai, another Chinese company.

Dixon told analysts that the company intends to spend ₹3,000 crore to make display modules and camera modules and had submitted an application to the Ministry of Electronics and IT (Meity) for the same.

The application was filed under the Centre’s electronics components manufacturing scheme (ECMS), which was notified in April this year, with a total outlay of ₹22,919 crore in incentives, of up to 50% in capital expenditure subsidies against setting up manufacturing of local electronics components for India’s tech supply chain.

“In the next six to nine months, investments would be made to expand the capacities and deepen the level of manufacturing,” Atul Lall, managing director of Dixon, told analysts in a post-earnings call on 17 October.

“We feel confident that the volume of smartphone camera modules can increase from 40 million units and revenues by ₹2,000 crore in large financial years to 190-200 million units per annum with the revenue closer to ₹6,000-7,000 crore, and sub-10% Ebitda margins in the next two to three years,” Lall said.

Syrma SGS

Syrma SGS, which manufactures laptops as well as electronics systems for railways, automobiles, and more, spent ₹235 crore to acquire a 60% stake in Elcome Integrated Systems, a Navi Mumbai-based company that specialises in electronics systems for defence and maritime clients.

“I expect the business to add ₹100 crore to my top line this fiscal year itself as well as some margin accretion as well, before the business ramps up over the next fiscals,” Jasbir Singh Gujral, managing director of Syrma, told analysts on 11 November.

Syrma recorded an operating margin of 7.8% during the July-September quarter against 6% a year ago.

Kaynes Technology

Mysuru-based Kaynes Technology India Ltd raised ₹1,575 crore from institutional investors, less than three years after it went public in November 2022. It expects to spend ₹160 crore, or about 10% of the money it has raised, on acquisitions.

“We continue to unlock backward integration into PCB manufacturing and parallel integration into OSAT (outsourced semiconductor assembly and test) and semiconductor packaging,” said Jairam Sampath, whole-time director and chief financial officer, in a call with analysts on 5 November.

These moves streamline the company’s production process, enhance the supply chain control, and also create margin accretive opportunities, Sampath added. “By connecting PCB and OSAT capabilities, we amplify innovation, operational efficiency and product quality, yielding cost advantages.”

Kaynes recorded 16.7% operating margin for Q2FY26 against 14.8% a year ago.

Amber Enterprises

Amber Enterprises Ltd, which listed in January 2018 as a maker of consumer durables such as air conditioners, also forayed into electronic manufacturing in FY23.

Electronics manufacturing, such as smartwatches and industrial systems, accounted for a fourth of Amber’s ₹1,647 crore revenue in the quarter ended September. Amber has spent a total of ₹693 crore on two acquisitions in the last quarter to scale up its presence in the space.

In July, it spent ₹431 crore to acquire a 40% stake in Israeli electronics components maker Unitronics, and followed this with an investment of ₹262 crore in Power-One Micro Systems in August.

Amber’s decision to scale up manufacturing electronic items such as automotive systems and printed circuit boards (PCBs) appears to be an effort by the management to shore up its wafer-thin operating margin of 2.2% in Q2 against 4.4% a year ago.

Tata, Foxconn and others

While the four firms represented a large chunk of India’s electronics manufacturing industry, privately held Tata Electronics and Taiwanese contract manufacturer Foxconn’s India arm, Bharat FIH, are also key entities in the electronics ecosystem.

Tata Electronics earned ₹66,602 crore in revenue in FY25 as per Tata Sons’ annual report, making it the biggest player in the industry.

Tata announced a ₹91,000 crore foray into semiconductor manufacturing in February last year, and is in the process of building India’s first commercial chip fab in Dholera, Gujarat.

Foxconn, meanwhile, announced a ₹15,000 crore expansion into electronics components manufacturing in India in May. Its India arm Bharat FIH has not filed its financial statements for last year.

Last month, Larsen & Toubro Limited (L&T), one of India’s largest engineering conglomerates, also announced plans to venture into electronics manufacturing. The company already has a subsidiary in chip design, L&T Semiconductor.

“While the overall growth is there in the market, there are certain weaknesses in cash flow generation for some of the EMS firms,” said Nirransh Jain, research analyst at financial services firm BNP Paribas.

“As a result, most of these companies are venturing into component manufacturing, which will be a key driver of future growth. Joint ventures and acquisitions are thus a key part of EMS firms’ strategies to improve client relationships as well as get the requisite technologies from these client-partners.”

Street expectations

There will be more focus on increasing value addition, and venturing deeper into the components and electronics ecosystem going ahead, said Jain. “However, the key thing to watch out for will be if the companies can deliver what the Street expectations have baked in.”

Dixon, which listed in September 2017 at ₹531 apiece, has given shareholders a 29x return on investment since then. During this time, the 30-share BSE Sensex has risen 1.6x.

Amber, which listed in January 2018 at ₹1,226, has returned 5.8x against the index rising 1.4x. Syrma has returned 2.8x since it listed at ₹881 in August 2022, against the Sensex rising 42%.

Kaynes, meanwhile, has given shareholders an 8.5x return since listing at ₹745 in November 2022, as against the index only rising 37%.

As per the Centre’s projections, electronics production in India is expected to reach ₹11 trillion by end-2025, and scale up 4x to ₹44 trillion by 2030.