The Electronics Component Production-Linked Incentive (PLI) scheme has witnessed significant policy developments as the government balances investment attraction with strategic oversight. Union Electronics and IT Minister Ashwini Vaishnaw has intensified monitoring requirements while MeitY signals openness to compliant Chinese investments, marking a pragmatic approach to India's electronics manufacturing ambitions with 2026 emerging as a critical semiconductor milestone.

Government's Stance on Chinese Investment

In an exclusive interview with CNBC-TV18, MeitY Secretary S Krishnan clarified the government's position on Chinese participation in the Electronics Component PLI scheme. The ministry confirmed that Chinese investments fully complying with India's foreign direct investment norms are eligible for PLI benefits, with no blanket exclusion policy in place.

This "light-touch" approach ensures proposals are evaluated based on regulatory compliance and security considerations rather than origin-based rejection, reflecting the government's intent to strengthen domestic electronics manufacturing while maintaining strategic safeguards.

Enhanced PLI Scheme Requirements and Monitoring

Addressing the electronics component industry, Minister Vaishnaw outlined stringent new expectations for PLI participants. Companies must build and strengthen design teams within India while reducing import dependence through higher levels of local sourcing. The minister emphasized adherence to Six Sigma quality standards to maintain global competitiveness.

The government's commitment to oversight is evident in Vaishnaw's announcement that progress will be closely tracked through daily review calls from his office, ensuring companies meet their timelines and commitments.

PLI Scheme Progress and Investment

The Electronics Component PLI scheme has gained significant momentum with substantial approvals and investments:

These approvals target domestic value chains for critical components including camera modules, display modules, printed circuit boards, and optical transceivers while boosting export competitiveness.

2026: Semiconductor Manufacturing Milestone

Vaishnaw highlighted 2026 as a pivotal year for India's semiconductor ambitions, with four major semiconductor units expected to begin commercial production:

This timeline represents a major milestone in establishing India's domestic chip manufacturing ecosystem and reducing dependence on imports. The electronics manufacturing sector continues its rapid expansion, currently employing approximately 25.00 lakh people across various segments, with mobile manufacturing alone accounting for 14.00-15.00 lakh jobs.

Kaynes Technology India Limited has received a credit rating reaffirmation from CARE Ratings Limited, with the agency maintaining its CARE A-: Stable/CARE A2 rating for the company's bank facilities. The rating announcement covers total facilities worth ₹625.20 crores and reflects the company's strong market position in the electronics system design and manufacturing sector.

Credit Rating Details

CARE Ratings has reaffirmed its ratings across multiple facility categories for Kaynes Technology India Limited:

The rating agency has also withdrawn the rating for the company's term loan facility as Kaynes Technology has repaid the debt and submitted the no-dues certificate.

Strong Market Position and Order Book Growth

The reaffirmation reflects Kaynes Technology's established presence in the ESDM industry, serving over 500 customers across 30 countries. The company has demonstrated exceptional growth with its order book surging significantly from ₹5,422.00 crores to ₹8,099.00 crores. In H1FY26, the company generated revenue of ₹1,579.00 crores with a PBDIT margin of 16.52%.

The company's revenue streams remain well-diversified across key sectors including automotive, aerospace and defence, electronics, railways, and medical segments. CARE Ratings particularly notes strong demand in IoT, electric vehicle, and aerospace segments, supporting sustained customer confidence and market leadership.

Semiconductor Manufacturing Initiative

Kaynes Technology is among the select domestic players approved under the Government of India's Semicon programme, marking its strategic entry into niche technology segments. The company is establishing an outsourced semiconductor assembly and testing (OSAT) unit in Sanand, Gujarat, and a bare PCB manufacturing facility.

In October 2025, Kaynes Semicon Private Limited, a subsidiary, successfully shipped 900 multi-chip module units to a customer for testing, demonstrating progress in the OSAT segment.

Financial Strength and Funding Strategy

The company's substantial capex plan of ₹4,700.00 crores over the next five years will be funded primarily through government subsidies and qualified institutional placement (QIP) proceeds, minimizing debt dependence. The successful second QIP raised ₹1,600.00 crores, with ₹841.00 crores utilized for repaying working capital borrowings in H1FY26.

Key Challenges and Risk Factors

CARE Ratings acknowledges several challenges facing the company, including the working capital-intensive nature of the ESDM industry and execution risks associated with the OSAT and PCB projects. The company imports 50-60% of its raw materials annually, exposing profitability to foreign exchange volatility.

The rating agency also considered clarifications provided by the company regarding certain observations in its FY25 audited annual report, including goodwill and intangible asset accounting, related-party transaction disclosures, and cash flow variances. Following management discussions, CARE believes the company's financial statements align with generally accepted accounting principles.

Outlook and Monitoring Factors

CARE Ratings maintains a stable outlook, expecting Kaynes Technology to sustain performance aided by its prominent ESDM market position and healthy order book. The agency will monitor the timely execution of OSAT and PCB projects, receipt of government subsidies, and the company's ability to improve operating cash flows while managing working capital requirements.

Positive rating factors include achieving steady-state revenue from ongoing capex translating into total debt/PBDIT of less than 1.5x, while negative factors involve project implementation delays resulting in total outside liabilities to tangible net worth exceeding 1x.