Syrma SGS Technology, a leading electronics manufacturing services (EMS) provider to global OEMs, has set an ambitious target to more than triple its current revenue of ₹1,000 crores in the next three years supported by its investment in capacity expansion, its transition to complete value player, and strong growth outlook in the EMS market over the next five years. While Syrma SGS is expected to incur CAPEX of about ₹150 crores through PLI schemes, it’ll also make additional investments in capacity. It proposes to add 3 lakh sq ft of space in south India and up to 2 lakh sq ft in north India.
Syrma SGS Technology is debt-free and has some cash on the balance sheet. “While we have the capabilities and people to drive our ambitious growth plans, we need to show more capacity and floor space for new customer acquisitions. The proposed plan will serve those requirements,” Sreeram Srinivasan, CEO of Syrma SGS Technology, told BusinessLine.
Shifting Focus to Domestic Market
Many developments in recent years have helped Syrma shift to a faster growth trajectory. Till 2017, Syrma SGS Technology was predominantly focused on export markets (making electronic parts for IoT, wifi segment, telecom, hand tools, air conditioners, among others), which made up 85-90% of its revenue. But the advent of the GST regime opened up opportunities in the domestic market. “Till then, we were operating out of SEZ units as we couldn’t understand the tax systems like Octroi, etc. With GST, we could see tremendous opportunity in the domestic market and we set up our Baval (Haryana) factory for the same,” he said.
SGS Tekniks Acquisition
In addition to this, everything is becoming smart – from footwear to toothbrushes – and consumption of electronic products has been growing manifold in India. In the last two years, it realized that domestic business will grow faster than exports. And so it acquired pure-play EMS company SGS Tekniks to drive its domestic growth. The acquisition proved to be a right fit as SGS has been garnering about 80% of its revenue from the domestic market and was focused on sectors such as automotive, white goods and smart meters, etc where Syrma was not present. “While the acquisition made Syrma a ₹1,000 crore company, the SGS deal gave us a strong geographical footprint to serve the domestic market with its 4 factories across India. We now have a balanced focus on domestic and export markets,” said Srinivasan.
Positive Growth Outlook
As Syrma SGS Technology is ready with an expanded footprint and capabilities, the growth outlook is also bright. EMS market is set to grow at a CAGR of 30% in the next five years. Syrma SGS Technology has also been transitioning from a contract manufacturing company to a full-fledge player in EMS. Now, it offers design and prototype services, manufacturing capabilities, testing expertise, and repair & rework services. “While the general lead time to develop a new prototype is 10-12 weeks, Syrma, with its Zone of Autonomous Creation (ZAC), is able to deliver within 4-6 weeks,” said Srinivasan.
The domestic market for electronic components is expected to increase from $21 billion in 2019-20 to $119 billion by 2025-26. The global electronic components market is valued at about $370 billion and is dominated by China with a third of the share, closely followed by Taiwan, Hong Kong, and the USA.
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