A sharp rise in graphics processing unit and memory costs is forcing a rethink of India’s flagship electronics incentive scheme, with the government now recalibrating Production-Linked Incentive scheme (PLI) 2.0 for IT hardware.
The move signals a shift from volume-led assembly to value-linked manufacturing, particularly in artificial intelligence (AI) servers and advanced components, potentially reshaping the opportunity set for electronics manufacturing services (EMS) players. PLI 2.0, in its revised form, is expected to better account for the higher bill of materials in AI hardware, while continuing to reward incremental production, reduce import dependence and deepen domestic capabilities.
Against this backdrop, a clutch of EMS companies with exposure to servers, displays and semiconductor packaging could be early beneficiaries, if policy design aligns with industry expectations.
Here are three stocks to watch:
Syrma SGS Technology
Syrma is emerging as a niche player in high-end electronics, with a growing foothold in the server ecosystem. Its recent partnership with Giga Computing (a Gigabyte subsidiary) to manufacture server boards in Chennai positions it closer to the AI hardware value chain than most peers.
If PLI 2.0 introduces targeted incentives for AI servers to offset elevated GPU costs, Syrma could benefit disproportionately given its early presence in this segment. That said, policy specifics remain unclear, and any upside is contingent on how the scheme is structured.
Financially, momentum is strong. Revenue rose to ₹12,642 million in Q3 FY26 from ₹8,697 million a year earlier, while net profit more than doubled to ₹1,103 million from ₹530 million. Management expects EBITDA to exceed ₹5,000 million in FY26 (vs ₹3,240 million last year) and sees growth of around 30% going forward.
Dixon Technologies
Dixon remains the most direct proxy for India’s PLI-driven manufacturing push. As the country’s largest EMS player, it has consistently benefited from incentive-led scale-up across consumer electronics.
The company is now doubling down on backward integration. Its joint venture with HKC is building display module capacity of 24 million smartphone units and 2 million notebook units annually in the first phase—largely for captive use. In the second phase, smartphone display capacity is set to rise to 60 million units, further improving cost efficiencies and supply-chain control.
In Q3 FY26, revenue stood at ₹106,716 million (vs ₹104,537 million YoY), while net profit rose to ₹3,127 million from ₹2,127 million. A PLI recalibration that rewards higher-value components could reinforce Dixon’s scale advantages.
Kaynes Technology
Kaynes offers a different lever—semiconductor backend manufacturing. Through its subsidiary Kaynes Semicon, the company is setting up an OSAT (outsourced semiconductor assembly and test) facility in Sanand, Gujarat, expected to go live by September 2026.
With memory prices rising, policy support could increasingly shift toward domestic packaging and value addition rather than just final assembly. That would place Kaynes in a favourable position if PLI 2.0 expands its scope to semiconductor ecosystems.
The company has also forged partnerships with Japan’s AOI Electronics and Mitsui & Co. to strengthen its semiconductor ambitions—aligning with India’s broader push to build a domestic chip ecosystem.
Financials remain steady: Q3 FY26 revenue rose to ₹8,040 million from ₹6,612 million YoY, while net profit increased to ₹766 million from ₹665 million.
The bottom line
The proposed rejig of PLI 2.0 underscores continued policy backing for electronics manufacturing, with a likely pivot toward higher-value segments such as AI hardware and semiconductors. If executed well, this could improve revenue visibility, margins and investment cycles for EMS players.
But the market tends to price policy optimism early. Valuations across the space are already rich, often factoring in aggressive growth assumptions and capacity expansions. Any delay, dilution, or mismatch between incentives and execution could trigger sharp corrections.
Happy investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated fromEquitymaster.com