New Delhi [India], August 25 (ANI): Exports are likely to be the key driver for mobile phone brands seeking to consistently beat the growth benchmark and maximise incentives under the newly notified Mobile Phone Manufacturing Scheme (MPMS), according to a report by Kotak Institutional Equities.
The report said this is because India's domestic smartphone market has seen limited volume growth, while the country's mobile phone production has expanded largely on the back of rising exports.
The Ministry of Electronics and Information Technology (MeitY) notified the MPMS last week with a budget outlay of Rs 62,500 crore. The scheme is aimed at making India more competitive globally by increasing manufacturing scale, expanding the domestic supply chain through higher Domestic Value Addition (DVA), and strengthening local manufacturing capabilities.
Under Target Segment 1 (TS1), brands have to grow sales by more than 15 per cent annually over a moving baseline to generate sales eligible for incentives. Kotak said this could be difficult to achieve through the domestic market alone.
"MPMS introduces a 15% moving baseline, under which brands must grow sales above ~15% annually to generate eligible sales and qualify for incentives. Given that the Indian smartphone market delivered only ~1.8% volume CAGR and ~14% value CAGR during CY2022-25, driven largely by premiumization rather than unit growth, sustaining growth above the scheme hurdle through domestic demand alone may become increasingly difficult," the report noted.
In contrast, India's mobile-phone production has grown at approximately 24 per cent CAGR over FY2021-26, primarily driven by rapid export expansion.
"We, therefore, believe exports will be the key lever for brands to consistently exceed the TS1 baseline and maximize incentive payouts under MPMS, making the scheme structurally more favorable for export-oriented brands and their EMS partners," the report stated.
The MPMS policy also supports Indian mobile phone brands in achieving technological sovereignty, capturing greater economic value, encouraging domestic patents in design and research and development (R&D), and generating employment.
Eligibility under TS1 extends to mobile phone manufacturers, including Electronics Manufacturing Services (EMS) companies, registered in India with a minimum turnover of Rs 10,000 crore in FY 2025-26. Existing brands must meet an annual threshold of Rs 5,000 crore every year over and above FY 2025-26 sales. A new brand becomes eligible only after achieving total annual sales of Rs 10,000 crore in India, and must thereafter meet the year-on-year threshold sales requirement of Rs 5,000 crore.
Addressing the second category, Target Segment 2 (TS2), the report highlighted its focus on domestic players noting that "TS2 is financially more generous and structurally easier on annual sales thresholds, although strict Indian ownership and R&D conditions remain the key criteria."
Eligibility under TS2 extends to mobile phone manufacturers, including EMS companies, registered in India with a minimum turnover of Rs 1,000 crore in FY 2025-26, and satisfying all criteria of an 'Indian Brand', registered/incorporated in India; IP and trademark held within India; management control with Indian citizens; more than 51% shareholding held by Indian citizens; and in-house R&D and design capabilities in India. (ANI)
Exports key for mobile brands to maximize Mobile Phone Manufacturing Scheme incentives: Kotak
