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Shrinking profit margins hit popular 'Make in India' trade in electronics
Bloomberg
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A sector that underpinned the once-popular 'Make in India' trade is faltering as shrinking margins and slowing growth shake investor confidence.
Following triple-digit share gains in recent years, electronics manufacturers — who make everything from Samsung Electronics Co. phones to air conditioning units — are facing a sharp reversal as investor enthusiasm cools. Among them, shares of Dixon Technologies India Ltd. and Kaynes Technology India Ltd. have tumbled more than 15 per cent this year, underperforming the broader market rally.
The unwind marks a turning point of a trade once central to the bullish case about India's manufacturing ascent. As companies boost spending, some investors are questioning whether market demand is keeping pace with the flood of investments. Rich valuations, increased competition and an expiry of government stimulus programmes are adding to the unease.
'There is plenty of topline growth available for the leaders in this space – but when we incorporate high valuations and sensible margin scenarios into the growth outlooks, we believe capital can be more effectively deployed elsewhere,' said Vikas Pershad, a fund manager at M&G Investments.
The underperformance follows years of stellar gains, when shares of these companies surged thanks to hopes India could emerge as a manufacturing powerhouse to rival China. But that market frenzy also pushed valuations higher, with most stocks in the segment trading at above 50 times its one-year forward earnings, more than twice that of NSE Nifty 50 Index. Dixon's Taiwan peers Hon Hai Precision Industry Co. and Wistron Corp. trade at about 11 to 12 times forward earnings.
Wall Street firms are turning less bullish on the outlook. Jefferies analysts said this week that the risk-reward for Dixon appears stretched and reiterated its underperform rating, while Morgan Stanley downgraded the stock to a sell equivalent. Meanwhile, the ratio of sell rating to total recommendations for Kaynes is at the highest since its listing in 2022, according to data compiled by Bloomberg.
Sentiment has shifted partly due to the looming expiry of the government's production-linked incentive scheme, a key part of Prime Minister Narendra Modi's manufacturing push. While the government has stayed mum on any extensions, media reports say Modi will let it lapse due to disappointing results.
Dixon will likely be impacted when the incentives for mobile phone manufacturers expire in the fiscal year ending March 2026.
Some firms are expanding upstream by acquiring suppliers, raising investor concerns about long-term cost increases. Kaynes is investing 34 billion rupees ($397 million) for a semiconductor assembly facility, while Amber has committed up to 24 billion rupees over five years for its electronics division.
Beyond electronics manufacturing, other segments of the market once central to manufacturing renaissance hopes have also slid this year. Those include shares of some renewable firms like solar panel and battery makers, as well as some auto component makers. In the latest blow, Foxconn Technology Group has asked hundreds of Chinese staff at iPhone plants in southern India to fly home. While India is still expected to significantly increase its manufacturing base, uncertain market growth has prompted many stock investors to step back for now.
'Much of the growth so far was driven by government incentives, and long-term success will depend on quality of the capex and whether firms can develop a lasting edge over its competitors,' said Vipraw Srivastava, an analyst at PhillipCapital India.
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First Post
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India-UK FTA makes Scotch cheaper. India and its love affair with whisky
It's time for Indians to raise a toast. The signing of the India-UK FTA on Thursday (July 24) will see tariffs on Scotch whisky reduced at the first stage to 75 per cent from 150 per cent, followed by a progressive reduction to 40 per cent over the next decade. This, in turn, will help reduce the cost of these alcoholic spirits read more Hic, hic, hooray! On Thursday (July 24), India and the United Kingdom finally signed the much-awaited Free Trade Agreement (FTA) after three years of intense negotiations and deliberations. As PMs — Narendra Modi and Keir Starmer — signed on the dotted line, the UK government announced that the new trade pact will likely boost annual bilateral trade between India and the UK by £25.5 billion. The India-UK FTA will see a reduction in tariffs on several British products, including items such as chocolates, Scotch whisky, luxury cars, cosmetics, chocolates, biscuits, lamb, salmon, soft drinks, and medical devices. STORY CONTINUES BELOW THIS AD But how much cheaper will Scotch whisky and gin become as a result of the trade deal? We examine the impact of it. Reduced tariffs on Scotch whisky and gin The newly-signed India-UK FTA reduces the import duties on Scotch whisky and gin. Under the FTA, the Total Customs Duty on imported alcoholic spirits, limited to whisky and gin from the UK, will be halved at the first stage to 75 per cent from 150 per cent, followed by a progressive reduction to 40 per cent over the next decade. This new tariff structure will apply to both Bottled-in-Origin (BIO) and bulk imports used for making Bottled in India (BII) products, as well as blending with Indian Made Foreign Liquor (IMFL). Shortly after the signing of the FTA, the International Spirits and Wines Association of India (ISWAI), the apex body representing premium alcoholic beverage companies in India, welcomed the move, calling it a historic moment. The ISWAI said that for the alcobev sector, this agreement paves the way for a more balanced and equitable trade environment, particularly given that Indian alcohol exports to the UK have zero import duties. 'The deal will significantly benefit Indian consumers, as premium international spirits will become more accessible, thereby accelerating the ongoing trend of premiumisation. It will also stimulate growth across ancillary sectors such as hospitality, tourism, and retail, while potentially increasing revenue for Indian states,' said Sanjit Padhi, CEO, ISWAI. Other industry executives also welcomed the move. Diageo India MD and CEO Praveen Someshwar said, 'We laud the Indian and British governments for formalising this historic treaty, which will boost bilateral trade and positively impact the accessibility of premium Scotch whisky in India, reigniting growth and increased choice for Indian consumers.' STORY CONTINUES BELOW THIS AD Chivas Brothers Chairman and CEO Jean-Etienne Gourgues also termed the India-UK FTA as 'a sign of hope in challenging times for the spirits industry'. Even Onkar Sharma, a partner at Khaitan & Co agreed with this, telling Moneycontrol, 'This tariff reduction is expected to make premium UK brands more affordable in India, boosting their market share and benefiting companies like Diageo and Chivas Brothers while enhancing consumer choice and potentially increasing state revenues through premiumisation.' Raising a toast to lowered prices As a result of the FTA and reduced tariffs, the price of Scotch whisky brands in India is expected to fall — depending on the Indian states' excise and pricing policies. Most news reports state that in the premium segment, the cost of brands such as Johnnie Walker Black Label and Chivas Regal will fall by Rs 200-300 per bottle. Currently, the price of a Johnnie Walker Black Label (750 ml) costs around Rs 3,100 in Delhi and Rs 4,200 in Mumbai. In the standard segment, brands like Red Label and Ballantine's may cost less by Rs 100-150. The cost of whisky brands such as Chivas Regal in India will most likely be reduced by Rs 200-300 as a result of the India-UK FTA. File image/Reuters Industry experts noted that the biggest winner from the India-UK FTA won't be the end consumer, but the companies. Liquor industry expert Vinod Giri explained to PTI, 'Consumer prices for imported Scotch (whiskey) are not likely to change much. 'Most of the taxes on alcohol sit in states, and even if all customs duty reduction is passed on, the impact on consumer prices of imported Scotch whiskies will be in the range of Rs 100-300 per bottle.' STORY CONTINUES BELOW THIS AD He further highlighted, 'Stripped off all the noise, all the UK-India FTA will do for the whisky industry is help the bottom lines of companies. Consumers should not expect many changes. FTA will neither dramatically change the Indian whisky market nor open new vistas for Indian producers.' India's Scotch whisky consumption India has long been a consumer of alcohol with whisky consumption exploding by more than 200 per cent in the past decade. Last year, India was ranked as the world's number one Scotch whisky market by volume, according to the Scotch Whisky Association data. It regained its position after replacing France, with 192 million bottles exported in 2024, the association said. Other experts also note that whisky is among India's favourite spirits — it accounted for over 60 per cent of India's alcohol consumption last year, according to a report by The Times of India and The Hindu Business Line. In fact, a Moneycontrol report stated that within the first six months of 2024, India's whisky exports had increased 26 per cent to $78.5 million. Out of this, blended whisky, which accounts for half of the total exports, jumped 37 per cent, and premium whisky exports almost doubled to $6.3 million. Scotch whisky is one of India's most preferred alcoholic drinks. It accounted for over 60 per cent of India's alcohol consumption last year. File image/Reuters Moreover, the whisky market in India that was estimated to be worth $21.13 billion in 2023 is expected to grow at a compound annual growth rate (CAGR) of 4.61 per cent between 2024 and 2030, reaching a value of $28.97 billion by 2030. STORY CONTINUES BELOW THIS AD However, it's interesting to note that India's introduction to whisky wasn't all that smooth. As the British colonised India, it brought in its favourite, the whisky. But they came up against an obstacle in the form of Indians, who argued that they had their own local drinks. Owing to this, the British Raj established a commission to study scotch whisky in an attempt to prove to India that it was worth drinking. On completion of their studies, found out that scotch was harmless of outstanding quality, making it a perfect drink for social occasions. Scotch whisky entered India then, and has become a sign of taste and culture ever since. It became the drink that Indians brought in for social gatherings or used to toast during a particularly special celebration. At first, it was associated with the British and the Indian elite and the royalty. However, as time passed, whisky became more accessible to Indians, and as they say, the rest is history. STORY CONTINUES BELOW THIS AD With inputs from agencies
Time of India
an hour ago
- Time of India
Amid hectic meetings and tight schedules, Modi-Starmer Chai pe Charcha
Read more on Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer engaged in a "Chai Pe Charcha" business event, strengthening India-UK ties
Economic Times
an hour ago
- Economic Times
Amid hectic meetings and tight schedules, Modi-Starmer Chai pe Charcha
Indian Prime Minister Narendra Modi and UK Prime Minister Keir Starmer engaged in a "Chai Pe Charcha" business event, strengthening India-UK ties 12:45 01:56 04:04 03:15 04:14 02:49 04:23 06:56 04:36 02:12 03:11 08:45 05:31 03:21 18:22 12:02 18:58 05:28 03:00 03:57 01:54 12:00 19:16
