Tech goods import curbs, PLI can help Indian electronic manufacturers grow, says Goldman Sachs

The Directorate General of Foreign Trade (DGFT) in a notification issued last week, had imposed restrictions on import of laptops, palmtops, tablets, all-in-one personal computers and servers in bulk except for the purpose of research, repair or re-export.

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26 Aug, 2025 12:21

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The Union government’s recent decision to restrict import of tech goods can potentially benefit the domestic electronic manufacturing services (EMS) or the contract manufacturing companies, Goldman Sachs Equity Research said in a recent research note.

Apart from the import curbs (now deferred until October 31, 2023), the foreign equity research firm also expects some level of import substitution in domestic markets in the longer run owing to the ongoing government initiatives to incentivise local electronic manufacturing.

The Directorate General of Foreign Trade, in a notification issued last week had imposed restrictions on the bulk import of laptops, palmtops, tablets, all-in-one personal computers and servers. The government agency had made an exception for the imports intended for the purpose of research, repair or re-export and to those permissible under the baggage rules.

“As India moves away from import of electronics to domestic manufacturing, we anticipate a paradigm shift in the growth of its home-grown EMS companies,” the research firm said.

Current balance of trade

According to the recent estimates disclosed by the Ministry of Commerce, India’s electronic goods imports stood at $19,756.10 million in Q1FY24, a 6.25 percent increase from imports worth $18,593.86 million reported in Q1FY23.

Meanwhile, electronic goods exported from India rose to $6960.48 million in Q1FY24 from $4,733.57 million in Q1FY23.

The balance of trade, in the context of electronic goods in specific, stood at $12,795.62 million in Q1FY24 as compared to that of $13,860.29 million observed in the corresponding quarter of the previous fiscal.

Although the balance of trade as a whole and in terms of electronic goods appears to have come down in the June quarter, it still continues to be high considering the untapped domestic manufacturing potential. In simpler terms, the value of electronic goods imported by India is almost three times the value of the same it exports to other countries.

Potential beneficiaries

In the first quarter results of electronic goods makers announced so far, while the B2C segment underperformed, management commentaries from Havells and Blue Star noted that strong demand from the B2B segment had kept their order books strong.

Analysts expect companies like Dixon Technologies and Amber, which manufacture contract goods for prominent brands solely on a B2B model, to benefit from the government policies in the long run.

Goldman Sachs particularly expects the recent curbs on tech goods imports and PLI (performance-linked incentive) scheme to play in favour of companies like Dixon. “Brands (especially those which don’t have a manufacturing presence in India) may import semi-knocked down (SKD) units/components and outsource the assembly of these devices to EMS companies as has been happening for other electronics like mobiles and other small electronics,” the research firm said.

Dixon, currently the largest electronic contract goods manufacturer in India, already produces a small amount of tech goods. In its recent quarterly results, the company reported a 38 percent revenue growth in its ‘mobile and EMS’ segment. The company has shown interest in the Union government’s PLI 2.0 scheme chalked out to encourage IT hardware manufacturing in India, the note added.

According to a recent Business Standard report based on a source, which Moneycontrol couldn’t independently verify, nearly 44 tech goods manufacturers have already applied for the scheme worth Rs 17,000 crore.

The equities research firm is also positive on Amber, the largest domestic contract manufacturer of RACs (room air-conditioners), given the lower penetration of ACs in Indian households. “We see Amber as a primary beneficiary of the RAC story in India. The intrinsic valuation based on DCF (discounted cash flow) is attractive,” the research note said.

Ratings

Goldman Sachs expects Dixon’s FY25E EBITDA to be Rs 1,030 crore. Considering that the company’s stock is trading 3X higher than global peers, the research firm has rated it ‘neutral.’

“At this stage, we do not bake in any impact from the reported restriction and opportunity for Dixon in our estimates pending further details,” the note said. The research firm has set a target price of Rs 3,550 per share.

Goldman Sachs has rated Amber’s stock as ‘buy’ expecting the working capital to improve, supported by strong cash flows and increasing scope of penetration in the sector. The target price set by the research firm factoring in an upside potential is Rs 2,600 per share.

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