India's Electronics Manufacturing Services sector has grown from $10 billion to $40 billion in just five years, and according to Harshit Kapadia, Vice President at Elara Securities, the structural story is far from over.
"This is going to run for decades from now," Kapadia told ET Now, pointing to a powerful combination of global supply chain diversification, India's manufacturing cost advantage, and the government's renewed policy push, including a fresh outlay of ₹40,000 crore for the EMS sector.
On valuations, which had been a concern for investors, Kapadia offered measured reassurance. "A lot of corrections have happened in this space. They are not extremely cheap, but they are quite reasonable to relook at."
Dixon's Vivo deal: The numbers are big
The most closely watched development in the EMS space right now is Dixon Technologies' tie-up with Vivo and Kapadia put concrete numbers on what it could mean.
Vivo currently holds around 20% market share in India's mobile phone market. Dixon, according to Kapadia, is targeting two-thirds of that revenue over three to four years. But even in the near term, the opportunity is significant.
"If they are able to ramp up even 10% of Vivo's market share in the second half of this financial year, that is still close to ₹5,000 crore of revenue for Dixon in FY27," Kapadia said.
The FY28 projection is even more striking. Kapadia said Elara Securities is pencilling in approximately 5 million units for Vivo at a realisation of around ₹20,000 per piece, translating to roughly ₹10,000 crore in revenue from Vivo alone in FY28.
Crucially, Kapadia framed the Dixon story as shifting from a topline play to an earnings play. "Dixon's story is more now on earnings growth rather than topline growth, and we will see earnings really catching up much better than revenue growth in the second half of FY28," he said.
Syrma's Kaga JV: A Quality upgrade with better margins
Syrma SGS Technology's recently announced joint venture with Japan's Kaga Electronics is another catalyst Kapadia flagged as significant. The deal gives Syrma access to the Japanese market and, more importantly, a pathway to higher-quality, better-margin products.
"Growth looks to be at least in the range of 40% to 50%, with margins much better than what Syrma is currently doing," Kapadia said. The ramp-up is expected by Q4 FY27, with FY28 being the year of faster, more visible growth from the partnership.
Supply chain and demand: What to watch
On the supply side, Kapadia said the semiconductor shortage that hit the sector last year is no longer a concern, though the US-Iran conflict has created some shipping-related delays. Overall, supply chains look stable.
Demand, however, is more nuanced. Mobile phone volumes have been declining even as average selling prices rise, meaning EMS players in the mobile category will still see revenue growth, but not from volume expansion. Consumer electronics have also seen some softness due to inflation.
Top picks: Where Elara Securities is placing its bets
Kapadia's preferred names in the EMS space are Amber Enterprises and Syrma SGS Technology as his top picks, with Kaynes Technology also favoured, though he expects meaningful improvement only from the second half of the year. On Dixon, he is selectively positive, with the Vivo deal the primary near-term trigger.
For long-term investors, the message is clear: the EMS correction has created an entry point, the policy tailwind is accelerating, and the best earnings surprises in this sector may still lie ahead.
