Few stocks stand to gain from PLI scheme

Analysts estimate that the scheme could add $144 billion to revenues of companies by FY27 and India’s exports could increase by $55 billion.

Indian manufacturers may be on the brink of discovering their potential. The incentives offered under the production-linked incentive (PLI) scheme is a catalyst that investors are betting could be a game-changer. However, there are very few publicly traded firms that could benefit from the programme. Shares of the few that are listed have already surged considerably on the announcement of these incentives.

The PLI scheme provides incentives equivalent to 4-6% of incremental sales over a base year for locally made electronic products to propel India into the top three mobile manufacturers. (HT Archives)

Analysts estimate that the scheme could add $144 billion to revenues of companies by FY27 and India’s exports could increase by $55 billion. Besides, these incentives are also likely to create 2.2 million jobs and see $22 billion of direct capital spending, according to a December 11 report by Credit Suisse India. Among the sectors that could benefit hugely is electronics manufacturing, particularly mobile manufacturing. The PLI scheme provides incentives equivalent to 4-6% of incremental sales over a base year for locally made electronic products to propel India into the top three mobile manufacturers.

Electric vehicle makers, battery producers, textile firms and food processing companies are some others that will gain from the push to encourage local manufacturing. About 62% of the second PLI scheme outlay of Rs1.46 lakh crore is towards supporting automobiles, batteries and drugs production over a five-year period.

“Production-linked incentives are a meaningful change in India’s industrial policy,” said the Credit Suisse report.

But there are some sceptics. “China has built infrastructure and logistic parks, which provide facilities such as power at much cheaper rates. Even the land cost for manufacturers is lower (than India). India is lagging in these aspects. Eventually, the market will realise that the benefits being expected from the package are not coming as easily or as quickly as was anticipated,” an analyst at an institutional brokerage said, seeking anonymity.