Top 5 Indian stocks to watch out for

September 26, 2023

The IT hardware industry is a crucial pillar within the Indian technology ecosystem and contributes significantly to economic expansion and job creation.

In recent years, demand for laptops, tablets and personal computers has skyrocketed, mainly due to the shift to remote work and digital education.

However, India has been largely dependent on imports to meet this demand, making it imperative to promote domestic production in this sector.

In response to this challenge, the government has introduced a Production-Linked Incentive (PLI) scheme specifically tailored to the IT hardware sector.

This scheme offers tempting incentives designed to encourage growth

Domestic production for laptops, tablets, personal computers and servers.

With a budget allocation of Rs 170 billion (billion), the scheme has attracted significant attention and attracted numerous domestic applicants.

Here are five of these domestic applicants who want to benefit from the PLI scheme.

#1 Netweb Technologies

The top of the list is Netweb Technologies.

Netweb Technologies designs, manufactures and deploys HCS consisting of proprietary middleware solutions, end-user tools and a precompiled application stack.

It develops homegrown computing and storage technologies and deploys supercomputing infrastructure under India’s National Supercomputing Mission.

Under the previous Production-Linked Incentive (PLI) program, tailored to IT hardware manufacturing, the company dedicated its efforts to developing products and solutions aimed at facilitating the seamless deployment of cloud-based private 5G networks for organizations .

Netweb Technologies places particular emphasis on the infrastructure and backend aspects of private 5G, differentiating it from conventional radio access technology for 5G networks.

This strategic focus aligns with the company’s substantial investments in this area, driven by its belief in the escalating demand for private 5G networks.

Netweb believes there will be strong demand for private 5G in the hospitality, manufacturing and shipping sectors, where Wi-Fi may not meet connectivity and reliability requirements.

Its performance was remarkable during the first year of the PLI scheme. The company achieved double the target turnover in the first year itself.

In the future, the company will almost double its capacity. It is coming with more motherboard production to support this plan.

For more details, see Netweb Technologies’ company fact sheet and quarterly results.

#2 Dixon Technologies

Next on the list is Dixon Technologies.

The company is a multinational electronics manufacturing and services company.

It offers design-oriented solutions in consumer durables, home appliances, lighting, mobile phones and security equipment.

In 2021, Dixon Technologies was among the companies selected to participate in the Government of India’s PLI program for IT hardware with a focus on mobile phones.

This approval made Dixon Technologies eligible for financial incentives based on increasing sales of IT hardware products manufactured in India.

Building on its involvement in the PLI IT Hardware 2023 programme, the company has outlined ambitious plans to invest around Rs 2.5 billion over the next two to three years.

These investments are focused on a new manufacturing facility and advancing localization efforts, reaffirming Dixon Technologies’ commitment to strengthening domestic manufacturing capabilities.

It is in talks with IT hardware companies in the US and China for manufacturing laptops under the revised PLI program for this segment.

Discussions with two customers, likely HP and Lenovo, are at an advanced stage, which could help the electronics manufacturing services player achieve incremental production targets under the revised PLI scheme.

For more details, see Dixon Technologies’ company fact sheet and quarterly results.

#3 Syrma SGS technology

Next on the list is Syrma SGS Technologies.

Syrma SGS is one of the leading providers of Electronic Manufacturing Services (EMS) in India.

The company offers services including product design, engineering, printed circuit board (PCBA) assembly, box building and testing.

In 2021, Syrma SGS was among the companies selected to participate in the Indian government’s IT hardware PLI program.

Under this programme, Syrma SGS has committed to invest a substantial amount of over Rs 10 billion in improving IT hardware manufacturing infrastructure.

The PLI for IT Hardware initiative offers eligible companies attractive incentives ranging from 4% to 1-2% on net incremental sales achieved compared to the base year 2019-20.

The program will span four years, from 2021-22 to 2024-25.

This incentive program applies to select product categories including laptops, tablets, all-in-one personal computers (PCs) and servers, all of which must be manufactured in India.

Being part of the PLI 2023 IT Hardware Program, it plans to increase its manufacturing capacity and develop new products.

Going forward, Syrma plans to make a capital investment of Rs 1.5 billion in FY22-27 and expand its facilities in Manesar, Haryana.

For more details, see Syrma SGS Technology’s company information sheet and quarterly results.

#4 Kaynes Technologies

Next on the list is Kaynes Technologies.

Kaynes Technologies is a leading electronics manufacturer in India. The company offers a wide range of services, including the design, production and assembly of electronic products.

In a proactive move, the company has thrown its hat into the ring by bidding for the PLI 2.0 initiative, tailor-made for the IT hardware sector, further reinforcing its commitment to driving the growth and capabilities of the sector shows.

Kaynes Electronics operates within the industrial manufacturing industry and is already in the midst of an ambitious investment project, channeling Rs 1.5 billion into the construction of a state-of-the-art manufacturing facility in Chamarajanagar, Karnataka.

The project is progressing well and construction work is in full swing. The PLI program is poised to provide additional impetus to Kaynes Technologies’ efforts.

Moreover, Kaynes Technology has forged a significant partnership by entering into a Memorandum of Understanding (MoU) with the Electronics, IT and BT Department of the Government of Karnataka.

This groundbreaking agreement, formalized on August 24, 2023, underscores the company’s commitment to advancing cutting-edge infrastructure.

Notably, this groundbreaking partnership includes a substantial investment commitment of Rs 37.5 billion, poised to usher in a new era of technological excellence in the region.

For more details, see the fact sheet and quarterly results of the Kaynes Technology company

#5 Optiemus electronics

Last on the list is Optiemus Electronics.

It is one of the leading providers of electronic manufacturing services (EMS).

Optiemus Electronics stands out for its broad portfolio and is engaged in the production of various IT hardware products, including networking equipment, storage devices, wearable technology, laptops and more.

Significantly, Optiemus Electronics has actively sought participation in the Government of India’s PLI program for IT hardware, demonstrating its commitment to promoting growth and innovation in the electronics manufacturing sector.

In a recent strategic move, Optiemus Electronics has entered into a notable partnership with Wistron Corporation’s Indian subsidiary, Wistron Infocomm Manufacturing (India).

This collaboration positions Optiemus Electronics to expand its production capacity in response to rising market demand.

Furthermore, Optiemus Electronics is intensifying its focus on IT hardware and telecom equipment, indicating its willingness to explore opportunities in the fast-growing electric vehicle (EV) sector.

For more details, see Optiemus Infracom’s company fact sheet and quarterly results

To conclude

The PLI 2.0 program is poised to provide a significant boost to India’s domestic IT hardware manufacturing.

By offering companies financial incentives to produce their goods in the country, this initiative is expected to result in expanded manufacturing capabilities, cost savings and increased innovation within India’s IT hardware sector.

Companies that participate in the scheme can therefore strengthen their position in the market.

However, with benefits also come risks.

PLI schemes are government-backed programs, which makes them susceptible to possible changes in government policies.

As a result, companies investing in PLI schemes may run the risk of having their incentives reduced or completely withdrawn.

Furthermore, with the upcoming 2024 elections, there is an added layer of uncertainty and potential policy shifts that could impact the stability and benefits of these arrangements.

Therefore, it is imperative to do thorough research before investing.

Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our referral services here…