India has launched a ₹62,500 crore Mobile Phone Manufacturing Scheme (MPMS) for FY27-FY31 to replace the existing PLI program. The move aims to increase domestic component sourcing and support local brands, leading to gains in stocks like Dixon Technologies, Syrma SGS, and Kaynes Technology. This policy change is expected to improve profit margins for electronics manufacturing services firms by encouraging higher value addition within the country.
Shares of major Indian electronics manufacturing services (EMS) companies moved higher on Thursday following the government's announcement of a new ₹62,500 crore incentive scheme for mobile phone manufacturing. This initiative, known as the Mobile Phone Manufacturing Scheme (MPMS), is scheduled to operate from FY27 to FY31, stepping in as the current production-linked incentive (PLI) framework nears its conclusion.
Impact of the New MPMS Structure
The government has designed the MPMS to provide incentives between 2.25% and 5% on sales of mobile phones produced within India. A key feature for investors is the additional 1.5% incentive offered specifically for sourcing components and sub-assemblies locally. Furthermore, firms can claim a 3% incentive on capital spending directed toward establishing and building an Indian mobile brand. These provisions aim to shift the industry from simple assembly toward deeper value addition, reducing the current heavy reliance on imported parts.
Financial Context and Margin Outlook
Industry experts and analysts suggest this policy is a notable shift for EMS companies. Under the previous PLI scheme, many manufacturers passed a significant share of the incentives on to their customers, which often constrained their own profit margins. The new scheme's emphasis on domestic component sourcing is expected to provide better support for company margins. Companies like Dixon Technologies have been specifically highlighted by analysts for their potential to benefit from this, as the incentive structure may alleviate concerns regarding margin pressure and customer retention.
Industry Performance and Market Reaction
On the back of this announcement, market reaction was positive for the sector. Dixon Technologies (India) Ltd led the gains with a rise of 6.1%, while Kaynes Technology India Ltd, Amber Enterprises India Ltd, and Syrma SGS Technology Ltd recorded gains of 3%, 2%, and 1.5%, respectively. These stocks outperformed the benchmark Nifty 50, which remained largely flat during the session. While the immediate market sentiment is optimistic, the sector's long-term performance will depend on the actual speed of implementation and the industry's ability to successfully develop a robust domestic supply chain.
Sector Challenges and Future Monitorables
India has achieved a significant milestone by becoming the second-largest mobile phone manufacturer by volume globally, with nearly all phones sold domestically now assembled in the country. However, moving up the value chain remains a challenge. The government's push to reduce reliance on external supply chains—particularly for components historically imported from China—is a critical strategic objective. Investors should continue to track the specific execution timelines of the MPMS, the actual adoption rate by manufacturing firms, and whether the targeted cumulative production of ₹39 trillion over the next five years is met by industry participants.