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

Syrma SGS currently produces laptops for DynaBook in Japan (formerly owned by Toshiba and currently owned by Sharp) and MSI in India in Taiwan. Negotiations with these companies for motherboard production are ongoing.

With this, Syrma, the country’s third-largest EMS company, will be among the first few companies to domestically manufacture computer motherboards among its domestic peers, a step towards adding value to India’s electronics-making efforts.

In April, Optiemus Electronics announced that it would form a production partnership with Taiwan’s ASRock to produce desktop computer motherboards. In November 2023, China-based Lenovo announced that it would produce motherboards for the laptops and desktop computers the company 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 as IT hardware PLI 2.0 in May 2023, does not only offer incentives for assembling laptops and requires EMS companies to also localize components to benefit from the incentives.

These incentives are what Jasbir Singh Gujral, managing director of Syrma SGS, is targeting by the end of financial year 2027.

Gujral said that currently all laptop motherboards are imported and the focus is on manufacturing them locally. “It has two additional advantages; first, it gives us more added value and the IT hardware PLI comes into play when I start assembling the motherboard,” Gujral said. Mint In an interview that emphasized the point that “not just ordinary laptop assemblies attract PLIs.”

This will add a margin of around 4-5% to Syrma SGS’s laptop assembly revenues. ₹175 crore in H1FY26. “This revenue may not increase much, but it will increase as the added value of the motherboard increases; the cost of the motherboard is also included in this income. My margin will at least increase. ₹10 crore on a six-month basis, Gujral said.

The market capitalization of the Mumbai-based company is over 100,000 ₹15,000 crore, announced its earnings late on Monday. won ₹Operating income in the second quarter of FY2026 increased by 20% sequentially to Rs 1,146 crore. Net profit also increased by 33% respectively ₹66.3 crore in the September quarter. However, the company’s gross margin fell 1.6 percentage points and net cash flow remained negative in the first six months of the year.

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

But even if there is pressure on working capital, inventories are at a comfortable level, he said. “The most difficult part of controlling the working capital cycle is inventory and I have it well under control. Debtors have increased and we believe that with more persistent monitoring we can reduce debt and improve cash flow,” said Syrma SGS Managing Director. “If my cash flow was down just because of inventories, that would be the harder part to manage.”

Syrma SGS has become the second EMS company, after Kaynes Technology, to delay its target of generating net positive cash flow amid expansions until the end of this financial year.

Beyond cash flow

But analysts weren’t too worried about this. Such a lag in cash flow quality is expected in fast-growing companies, said Harshit Kapadia, vice president at brokerage firm Elara Capital. “While this remains a short-term concern, the company’s overall financial health is good and its focus areas are strong, which will give investors good confidence in the long term.”

Earlier Tuesday, JM Financial said in a note to investors that Syrma SGS’s “strong performance in Q2 beat our consensus estimates.” Brokers maintained their ‘buy’ rating on Syrma SGS. Investors also welcomed Syrma SGS’s quarterly earnings; The share price rose 2.85% on Tuesday. ₹831.05 each.

Syrma SGS, which went public in August 2022, has offered investors 3.77 times returns to date, outperforming the 30-share BSE Sensex index, which is up 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 major driving force behind these companies has been the government’s PLI programs that encourage assembly of consumer electronics, home appliances and industrial electronics in India. Apart from 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 in terms of revenue, has already poured $1.3 billion into the sector. Mint It was reported on November 7. Apart from setting up a semiconductor manufacturing facility, Tata Electronics also plans to assemble many more Apple iPhones.

Driven by increasing opportunities in the light of the $2.7 billion electronic component manufacturing plan (ECMS) reported by the Center earlier this year, engineering company Larsen & Toubro (L&T) also said last month that it would venture into electronics manufacturing.

Syrma SGS was one of the first companies approved for the ECMS scheme on 27 October to produce printed circuit boards (PCBs) locally. This differs from the scheme of laptop motherboards.

“We are eyeing trial production of PCBs by January 2027. If that is the case, my capital expenditure from now till March 2027 will earn state government incentives from FY 28. Production-linked incentives will kick in only when commercial production starts, which will be in FY 28. So, we will realize PLI benefits for PCB production in FY 29. My total project cost for the same is: ₹765 crore, which makes us eligible for favorable incentives ₹380 crore as per capital expenditure. Half of this will come in FY28 and the rest will come in FY29,” Gujral said.

The company also expects an increase in exports to expand its operating margin. “Our target is to be a double-digit EBITDA company, which we achieved at 10.7% in the first half. We will stick to this margin for now and see how this plays out later when our healthcare business and exports grow further. In the first half, our exports increased by 36%, mainly driven by industrial, healthcare, RFID and some automotive equipment,” the MD added. EBITDA, short for earnings before interest, taxes, depreciation, and amortization, is a measure of the profitability of a business’s core activities.

According to the Indian Cellular and Electronics Association’s report dated August 8, India’s net electronics exports rose 33% year-on-year to $38.6 billion in FY25.