Dixon Technologies (India) Ltd. has signed a pact with Bharti Enterprises Ltd. to form a joint venture to make telecom and networking products, aiming to avail benefits under the government’s Rs 1.46-lakh-crore ($20 billion) incentive programme for setting up manufacturing in India.
Dixon’s wholly-owned subsidiary, Dixon Electro Appliances Pvt. or any other company identified by the parties will be the joint venture entity, which will undertake manufacturing of modems, routers, set-top boxes and IoT devices, among others, for the telecom sector, including Bharti Airtel Ltd., according to an exchange filing.
The said joint venture—to be 74% owned by Dixon and 26% by Bharti Enterprises—will file necessary applications with the Ministry of Communications or any other nodal agency to avail benefits under the production-linked incentive scheme, the filing said.
Dixon is a contract manufacturer of lighting, televisions, mobile phones and home appliances for Xiaomi, Samsung, Voltas, LG, Flipkart and Foxconn.
The Indian government in November last year said it would offer incentives to 10 sectors including automobile, solar panel, pharmaceuticals and specialty steelmakers over a five-year period. Telecom and networking products were allocated Rs 12,195 crore.
According to Atul Lall, managing director at Dixon, meeting targets of the PLI scheme in the first year itself will post a challenge for several players. “Approvals for the scheme came only in October-end. In our case, we have achieved the investment targets, but not the revenue threshold. For year two, that is, FY21-22, we’re confident that we’ll meet the investment threshold in the first quarter. The order book is extremely healthy, so by the second quarter, we should be able to achieve the revenue threshold. Many other beneficiaries under the scheme would be having similar status,” Lall told BloombergQuint in an interview on April 5.
The industry, he said, has made a representation to the government to shift the base year for the PLI scheme. “The request is that companies should be allowed to use 2021 or 2021-22 as the base year. This was made due to the approvals coming only in October and certain shortages on the components side. We haven’t heard anything from the government,” he said.
The PLI scheme is important since any industry needs support from policymakers at its stage of infancy, Lall said. “There would be some misses, but overall, the industry is going to emerge much more strongly because four-five years is a fairly long time for the industry to become more competitive,” he said. “I’m of the firm conviction that there will emerge a stronger electronics manufacturing industry.”
Shares of Dixon gained as much as 1.8% around 1:20 p.m. on Wednesday to Rs 3,545 apiece, against a 1.2% rise in the Nifty 50. Of the 20 analysts tracking the company, 14 have a ‘buy’ rating, five suggest a ‘hold’ and one recommends a ‘sell’, according to Bloomberg data. The stock is trading 10.7% higher than its 12-month consensus price target of Rs 3,129.4 apiece.