Indian electronics maker Syrma SGS eyes making laptop motherboards by FY27, in talks with MSI, others

Syrma SGS currently assembles laptops for Japan’s DynaBook (formerly Toshiba and now owned by Sharp), and Taiwan’s MSI in India. It is in talks with these companies for motherboard manufacturing.

With this, Syrma, the country's third-largest EMS company, will become among the first few among its domestic peers to make computer motherboards domestically, a step towards value addition in India's efforts in electronics making.

In April, Optiemus Electronics had announced a manufacturing tie-up with Taiwan's ASRock to make desktop computer motherboards. In November 2023, China-based Lenovo said that the company will make motherboards for laptops and desktop computers it sells in India. The company has its own assembly line in Puducherry, as well as a partnership with domestic EMS firm, Dixon Technologies. Other companies are yet to announce such localization of motherboard manufacturing, making it a nascent space in India.

The central government's production-linked incentives (PLI) scheme for laptops, notified in May 2023 in its current form as IT hardware PLI 2.0, does not offer incentives for only assembly of laptops — and requires EMS companies to localize components as well in order to be eligible for incentives.

Those incentives are what Jasbir Singh Gujral, Syrma SGS's managing director, is targeting by the end of fiscal 2027.

Currently, all its laptop motherboards are imported and the focus is to have them locally made, Gujral said. “There are two additional benefits—one, it gives us higher value addition, and once I start motherboard assembling, IT hardware PLI kicks in," Gujral told Mint in an interview stressing on the point that "only vanilla laptop assemblies do not attract PLIs".

This will add 4-5% margin on Syrma SGS's laptop assembly revenues which was about ₹175 crore in H1FY26. "This revenue may not go up significantly but will go up with the value addition of the motherboard—whose cost is included in this revenue here. My margin would go up by at least ₹10 crore on a half-year basis," Gujral said.

The Mumbai-based company, which has a market cap of over ₹15,000 crore, announced its earnings late on Monday. It earned ₹1,146 crore in operating revenue in Q2FY26, up 20% sequentially. Net profit, too, jumped 33% sequentially to ₹66.3 crore in the September quarter. However, the company’s gross margin dropped 1.6 percentage points and net cash flow for the first six months of the year remained in the negative.

Gujral said that Syrma SGC hopes to generate a positive cash flow by the end of this fiscal. A positive cash flow is a measure of a company’s financial health and its ability to make payments and invest in growth.

But, he said, inventories are at a comfortable level even if there's a strain on working capital. “The most difficult part of controlling in a working capital cycle is the inventory and my inventories are well under control. It is the debtors that have gone up, and we’re confident that with more persistent follow-up, we’ll be able to bring the debt down and improve cash flow," the MD of Syrma SGS said. "If my cash flow had reduced because of only inventories, that would have been the tougher part to manage."

Syrma SGS is the second EMS company after Kaynes Technology to be pushing back its target of generating net positive cash flow to the end of this fiscal amid expansions.

Beyond cash flow

Analysts, however, were not too concerned. Harshit Kapadia, vice-president at brokerage firm Elara Capital, said that such deferment in quality of cash flows is expected at companies that are rapidly expanding. “While this remains a near-term concern, the overall financial health of the company is good and its focus areas are strong — which should give investors good confidence in the long run."

Earlier on Tuesday, JM Financial a note to investors noted Syrma SGS's “strong 2Q performance beating our consensus estimates". The brokerages retained a ‘buy’ rating on Syrma SGS. Investors, too, gave a thumbs-up to Syrma SGS’ quarterly earnings with the share price up 2.85% on Tuesday to ₹831.05 apiece.

Syrma SGS, which went public in August 2022, has offered investors a 3.77x return to date, outperforming the 30-share BSE Sensex index—which has risen 43% during this period.

Dixon Technologies went public in September 2017, followed by Amber Enterprises in January 2018, and then Syrma and Kaynes in November 2022.

A big push behind these companies has been the government’s PLI schemes, which encouraged assembling consumer electronics, home appliances and industrial electronics in India. Alongside the above four, privately-held Tata Electronics and Taiwanese giant Foxconn’s Bharat FIH have also doubled-down on expanding electronics manufacturing in India.

The Tata group, India’s largest conglomerate by revenue, has already poured in $1.3 billion into the sector, Mint reported on 7 November. Tata Electronics is eyeing the assembly of a lot more Apple iPhones as well as setting up a semiconductor fabrication plant.

Driven by rising opportunities in light of the Centre’s $2.7-billion electronics components manufacturing scheme (ECMS) notified earlier this year, engineering conglomerate Larsen & Toubro (L&T) also said last month that it will venture into electronics manufacturing.

Syrma SGS was one of the first companies approved for the ECMS scheme on 27 October, for manufacturing printed circuit boards (PCBs) locally. This is different from the laptop motherboards plan.

“We’re eyeing trial production of PCBs by January 2027. If that is the case, then my capital expenditure from now until March 2027 will win state government incentives from FY28. The production-linked incentives will kick in only when commercial production begins, which will be in FY28. So, we’ll realize the PLI benefits in FY29 for PCB manufacturing. My total project cost for the same is ₹765 crore, which makes us eligible for incentives to the tune of around ₹380 crore based on capital expenditure. Half of this will come in FY28, and the rest in FY29," Gujral said.

The company is also eyeing a rise in exports to expand its operating margin. “Our goal is to be a double-digit Ebitda company, which we achieved at 10.7% in H1FY26. We’ll stick to this margin as of now and then we’ll see how it pans out once our healthcare business as well as exports go up further. Our exports increased 36% in H1, primarily driven by industrial, healthcare, RFID, and a bit of automotive equipment," the MD added. Ebitda, short for earnings before interest, tax, depreciation, and amortization, is a measure of profitability of the core operations of a business.

According to an 8 August report by India Cellular and Electronics Association, net electronics exports from India rose 33% year-on-year to reach $38.6 billion in FY25.