Story continues below Advertisement Remove AdOn April 9, Dixon Technologies said it was acquiring a majority 50.10 per cent share in Ismartu India, a subsidiary of Transsion Technology.
The home-grown EMS company plans to invest Rs 500 crore towards expanding production capacity for mobile manufacturing, which is its largest business, and display module manufacturing.
Dixon has finalised the technology partner to form a joint venture for display module manufacturing.
With display module manufacturing, precision components and mechanicals, the company is preparing for its foray into the component ecosystem.
Dixon is also looking at building a campus in Tamil Nadu which will house a new business from a global player.
Dixon Technologies (India)
live bse live
nse live Volume Todays L/H More ×
Dixon Technologies is actively looking at merger and acquisition (M&A) opportunities in the country to further accelerate its growth in the electronics manufacturing segment and has a strong balance sheet and the technical competence to support such moves, the company’s Managing Director, Atul Lall, told Moneycontrol.
“We will not shy away from inorganic ways of growing if the right opportunity comes just like Transsion, which is a big trigger for us. We will be on the lookout. We have a strong balance sheet, technical competence and multiple customers across multiple product categories. Strong public markets have reacted to us positively. So funding is not an issue,” he said in an exclusive interview.
Story continues below Advertisement Remove Ad
On April 9, Dixon Technologies said it was acquiring a majority 50.10 per cent share in Ismartu India, a subsidiary of Transsion Technology. Both companies are currently awaiting approval from the Competition Commission of India (CCI), the Indian contract manufacturer said in the recent Q4 earnings call.
Mobile, he said, offers the largest addressable market opportunity in India and the company is creating an annual capacity of almost 40 million-45 million mobile units by this fiscal year. With top Android brands like Samsung, Xiaomi, Realme, Motorola and Transsion-Ismartu brands like Techno, iTel, and Infinix, Dixon is targeting to corner 40-45 percent of the total EMS outsourcing opportunity in India.
The home-grown EMS company plans to invest Rs 500 crore towards expanding production capacity for mobile manufacturing, which is its largest business, and display module manufacturing. “The display module investment worth $30 million will happen if the deal comes through,” Lall said.
Dixon has finalised the technology partner to form a joint venture for display module manufacturing. These display modules will be used on smartphones, laptops and tablets.
With display module manufacturing, precision components and mechanicals, the company is preparing for its foray into the component ecosystem.
“There has to be a creation of a components ecosystem beyond semiconductors. In our small way, we are trying to pursue that path so that we can stand on our own feet. The ecosystem for mobile manufacturers is there to support but for a long-term story, there has to be a deepening of the ecosystem,” the top executive said.
Story continues below Advertisement Remove Ad
Story continues below Advertisement Remove Ad
Any home-grown technology in the component space is “practically impossible” due to the involvement of advanced technologies, and Indian companies need the partner route to make a foray. “I don't think in India, we can or we should even reinvent the wheel,” he said.
The company’s plans for the component space follow the Indian government’s plan to bring a production-linked incentive (PLI) scheme for electronic components. The Ministry of Electronics and Information Technology (MeiTY) plans to introduce a PLI scheme similar to the mobile and IT hardware schemes after executing a consultation process with industry stakeholders.
The electronics manufacturing industry is urging the government to implement a production-linked incentive (PLI) scheme worth Rs 30,000 crore - Rs 35,000 crore for components and sub-assemblies, along with capital expenditure support to bolster the rising exports of mobile phones and other electronics.
According to the India Cellular & Electronics Association (ICEA), this incentive scheme is crucial to meet the growing demand for electronics components, which is expected to reach $75 billion-$80 billion by 2026 and $300 billion by 2032, supporting the manufacturing of $300 billion worth of electronics products by 2026 and $1.2 trillion by 2032.
Dixon is also looking at building a campus in Tamil Nadu which will house a new business from a global player. “...we are very optimistic of securing some large contracts and that has to be in a space from a global player. We are setting up a campus down south in Chennai where this is going to be housed,” he said, without divulging more details.
The company also expects its joint venture with Airtel to yield results as demand for customer premises equipment (CPE) and routers picks up due to the rollout of 5G fixed wireless access (FWA) broadband service in the country. “It is relatively a smaller business but is on a growth path.”
The IT hardware segment over the next two to three years can also be a $1 billion opportunity for Dixon. In this segment, the company has bagged some contracts and is planning to start commercial production by September. “This is going to be a new revenue generator.”
Among Indian players, BNP Paribas said that Dixon Technologies is emerging as a one-stop shop to play the high-growth EMS story on the back of new customer acquisitions and strong import substitution opportunities.
Dixon’s position in the mobile phone segment has been bolstered by large customer wins, higher orders from existing customers, and recent acquisitions and tie-ups. “We forecast Dixon to deliver 45% and 52% revenue and PAT CAGR over FY24-27. We believe that the company’s strong growth potential, on the back of a lean working capital cycle, an average ROE of 21% (over the past 8 years) and a higher fixed asset turnover (7x) will continue to underpin its premium valuation,” BNP Paribas said.
