Union Budget 2026: Why Syrma SGS Technology is a Major Winner in the Electronics Boom

The Union Budget 2026, presented by Finance Minister Nirmala Sitharaman, has laid a robust foundation for India to become a global electronics manufacturing hub. For Syrma SGS Technology Ltd (SYRMA), a leading player in the Electronics Manufacturing Services (EMS) space, the budget announcements act as a powerful catalyst. With a strategic focus on scaling manufacturing in frontier sectors and fortifying the semiconductor ecosystem, the government has directly addressed the growth levers that Syrma has been positioning itself for over the last few years.

As of February 1, 2026, Syrma SGS stands with a market capitalization of ₹14,655.94 crore and a share price of ₹770.65. The company, which has already demonstrated a 37% year-on-year revenue growth in recent quarters, is now poised to benefit from a significantly expanded fiscal support framework. This article analyzes the specific budget provisions that will impact Syrma’s operations, margins, and long-term competitiveness.

The ECMS Power-Up: A ₹40,000 Crore Boost

The most significant announcement for the EMS sector is the massive expansion of the Electronics Components Manufacturing Scheme (ECMS). Originally launched in April 2025 with an outlay of ₹22,919 crore, the government has now increased this to ₹40,000 crore in Budget 2026. This scheme is designed to incentivize the domestic production of high-value components, moving India beyond mere assembly.

Syrma SGS is perfectly positioned to capture this benefit. The company has already received ESPMS (Electronic Components Manufacturing Scheme) approval for its ambitious Printed Circuit Board (PCB) projects. Syrma is investing approximately ₹1,595 crore in a new facility in Andhra Pradesh to manufacture single-layer, multilayer, HDI, and Flex PCBs. The increased budget outlay ensures that the subsidy pipeline remains robust, supporting Syrma’s goal of achieving EBITDA margins of 15% to 20% in its PCB business.

Semiconductor Mission 2.0 and Supply Chain Resilience

The launch of India Semiconductor Mission (ISM) 2.0 marks a shift toward producing equipment, materials, and full-stack Indian IP. While Syrma is primarily an EMS provider rather than a semiconductor fab, the development of a local component ecosystem is vital for its cost structure. By reducing dependency on imported chips and materials, Syrma can mitigate the risks associated with global supply chain disruptions and volatile freight costs.

Furthermore, the budget’s proposal to establish dedicated rare earth corridors in states like Andhra Pradesh and Tamil Nadu is a strategic win. Rare earth magnets are critical for automotive and industrial electronics—two of Syrma’s strongest segments. Localizing the mining and processing of these minerals will provide Syrma with a more stable and cost-effective raw material base for its high-precision manufacturing lines.

Defense and Aviation: New Frontiers for High-Reliability Electronics

Syrma’s recent strategic acquisition of a 60% stake in Elcome Integrated Systems was a clear move to enter the high-margin defense electronics space. Budget 2026 supports this diversification through specific customs duty exemptions. The Finance Minister proposed exempting basic customs duty on components and parts required for the manufacture of civilian training aircraft and raw materials for defense MRO (Maintenance, Repair, and Overhaul).

These measures lower the cost of entry and operation in the aerospace and defense sectors. As Syrma integrates Elcome’s capabilities, these tax reliefs will enhance the competitiveness of its indigenous defense solutions, which the company expects to grow from ₹200 crore to over ₹350 crore in the coming years.

Solving the Working Capital and Inventory Puzzle

One of the challenges highlighted in Syrma’s recent financial results was the increase in working capital days and higher inventory levels, partly due to supply chain uncertainties. Budget 2026 introduces a "Safe Harbor" for component warehousing in bonded warehouses at a profit margin of 2% of the invoice value. This regulatory shift simplifies the logistics of storing critical components in India, allowing companies like Syrma to maintain "just-in-time" inventory without the heavy tax burden previously associated with long-term storage.

Additionally, the push for the "Reform Express" and the reduction of over 350 compliance requirements will help Syrma streamline its operational overheads. The integration of TREADS (Trade Receivables Discounting System) with government procurement platforms will also provide better liquidity support for Syrma’s MSME-scale vendors, indirectly strengthening Syrma’s own supply chain.

Fiscal Consolidation and Corporate Taxation

The broader fiscal measures in Budget 2026 provide a stable environment for capital-intensive companies. The reduction of the Minimum Alternate Tax (MAT) rate from 15% to 14% offers a marginal but welcome relief to the bottom line. More importantly, the notification of the Income Tax Act 2025 (effective April 2026) aims to simplify tax filings and reduce litigation, allowing management to focus more on growth and less on compliance.

Market Impact and Investor Sentiment

The market has reacted positively to the budget's focus on manufacturing. For Syrma, which is currently trading at a P/E of 86.28 (based on historical data) and a P/B of 8.03, the budget provides the fundamental justification for its premium valuation. Investors are likely to view the increased ECMS outlay as a de-risking mechanism for Syrma’s large-scale capex in Andhra Pradesh.

While the stock remains 3.94x as volatile as the Nifty, the clear policy roadmap for electronics manufacturing provides a long-term "buy-and-hold" narrative. The company’s guidance of 30% to 35% revenue growth for FY26 now looks even more achievable, with potential for an upward revision in FY27 as the new budget measures take effect.

Conclusion

Union Budget 2026 is a defining moment for Syrma SGS Technology. By doubling down on electronics components, simplifying the semiconductor mission, and providing targeted tax reliefs for defense and aviation, the government has aligned its fiscal policy with Syrma’s corporate strategy. While challenges like US tariffs and working capital management remain, the domestic tailwinds created by this budget are undeniable. Syrma is no longer just an assembly player; it is evolving into a high-tech engineering powerhouse backed by a supportive sovereign framework. Investors should watch for the commencement of trial production at the Andhra Pradesh facility in late 2026 as the next major milestone.