PLI scheme: As India prepares for the Union Budget 2025, investors and industry leaders are eagerly anticipating key policy decisions, especially regarding the Production-Linked Incentive, PLI scheme. The government’s focus on bolstering domestic manufacturing is expected to bring several sectors and stocks into the limelight.
A recent report by ICRA suggests that the government may not only increase PLI allocation for FY26 but also extend its scope to include more labor-intensive sectors. With less than 10% of the allocated ₹1.97 lakh crore utilized by the end of 2024, there is a growing push for targeted interventions instead of a one-size-fits-all approach.
Additionally, analysts believe the Budget will aim to maintain fiscal stability, introduce tax reforms, and encourage private investments. HDFC Securities anticipates a comeback for domestic cyclicals in the second half of 2025, making financials, consumer discretionary, and healthcare sectors key areas to watch. With the Nifty declining 9% over the last four months, Budget 2025 could serve as a catalyst for market recovery.
Key Sectors and Stocks Benefiting from Production Linked Incentive scheme Expansion
1. Renewable Energy & Solar
The renewable energy sector saw a significant jump in budget allocation for FY25, increasing to ₹19,100 crore from ₹7,848 crore in the previous year. In Budget 2025, the government may expand PLI incentives for upstream solar components, including polysilicon and wafers, to boost India’s self-sufficiency in solar panel manufacturing.
Shekhar Singal, MD of Eastman Auto and Power, emphasizes that increasing domestic manufacturing capabilities is essential to reducing reliance on imports. Companies like Adani Solar and CleanMax are making significant investments, with Adani targeting 10 GW in solar cell and module production by 2026. Other stocks to watch include Premier Energies, Suzlon Energy, and Waaree Energies.
2. Electronics & Semiconductor Manufacturing
The electronics sector, particularly mobile manufacturing, continues to flourish under the PLI scheme. India saw a 17% YoY growth in smartphone exports in FY24, with Apple’s contract manufacturers—Foxconn, Wistron, and Pegatron—playing a significant role.
With exports expected to surpass ₹1.5 lakh crore in FY25, stocks like Dixon Technologies, Havells India, and Bharat Electronics Ltd are expected to benefit. Amit Goel, Co-Founder of Pace 360, recommends these stocks for long-term investors looking to capitalize on India’s growing electronics manufacturing ecosystem.
3. Pharmaceuticals & Healthcare
The pharmaceutical industry in India expanded by 9% YoY in FY24, reaching a market size of $54 billion. Sudarshan Jain, Secretary-General of the Indian Pharmaceutical Alliance, urges the government to allocate at least 10% of the National Research Fund to life sciences to strengthen domestic R&D.
India remains the world’s largest generic drug exporter, and an increased PLI push for active pharmaceutical ingredients (APIs) could further reduce dependence on Chinese imports. Key stocks to watch include Dr. Reddy’s Laboratories (Target: ₹1,575), Torrent Pharmaceuticals (Target: ₹3,750), and Sun Pharma.
4. Automobiles & Electric Vehicles (EVs)
With a total PLI incentive of ₹25,938 crore for the auto industry over five years, the electric vehicle (EV) segment is expected to be a major beneficiary. Although the overall automobile sector might see single-digit revenue growth and margin compression in FY25, EV adoption is projected to rise.
Nomura estimates EV penetration in India will reach 4% for passenger vehicles and 7.6% for two-wheelers by FY26. The PLI scheme will further encourage localization of key EV components like e-axles and printed circuit boards.
Maruti Suzuki is ramping up its EV ambitions with Japanese component manufacturers entering the Indian market. Tata Technologies, heavily focused on automotive engineering, has a bullish outlook, with JM Financial setting a buy target of ₹1,150.
5. Textiles Sector
Valued at approximately $140-145 billion, India’s textile industry is rebounding in FY25, particularly in the technical textiles and man-made fiber (MMF) segments. Experts believe the China+1 strategy will continue benefiting Indian textile exporters.
HDFC Securities’ Devarsh Vakil suggests that the PLI scheme will prioritize labor-intensive sectors such as leather, garments, and handicrafts, creating employment opportunities. Stocks like Vardhman Textiles and KPR Mill are expected to perform well as India targets $20 billion in textile exports by 2025.
However, higher raw material prices in India compared to global rates remain a challenge due to quality control orders (QCOs) on MMF and yarn. Industry leaders like Rajeev Gupta (CEO, RSWM Ltd) advocate for import policy liberalization and reinstatement of the Technology Upgradation Fund Scheme.
6. Steel Sector
India’s steel consumption surged by 13.66% in H1FY25, driven by infrastructure investments. Analysts expect Budget 2025 to introduce anti-dumping duties to protect domestic manufacturers from cheaper imports.
Companies like Tata Steel, JSW Steel, and SAIL stand to benefit from rising domestic demand. Experts believe an expansion of the PLI scheme to cover additional steel products would further strengthen the sector.
7. Power Sector
The Indian government plans to launch a PLI scheme for power transmission equipment to reduce reliance on imports and promote local manufacturing. With India targeting an additional 80 GW of thermal capacity by 2032, NTPC is set to invest in 25 GW of new power generation.
Brokerages like Axis Securities and Elara Capital have revised their price targets for NTPC (₹390-₹462), while also recommending JSW Energy, NLC India, and Tata Power as key stocks to watch.
Conclusion
With enhanced PLI allocations expected in Budget 2025, multiple sectors, including renewable energy, electronics, pharmaceuticals, automobiles, textiles, steel, and power, are set to benefit. Investors should keep a close eye on stocks linked to these high-growth areas, as increased government incentives could unlock significant value in the coming years.
As fiscal stability, private investment growth, and manufacturing incentives take center stage, Budget 2025 may serve as a crucial turning point for India’s economic trajectory. Investors looking to capitalize on these changes should consider aligning their portfolios with sectors poised for growth under the expanded PLI scheme.
Key Financial Ratios to Consider Before Investing
For investors looking to benefit from PLI-driven growth, analyzing financial ratios is crucial:
- Price-to-Earnings (P/E) Ratio – Indicates whether a stock is overvalued or undervalued compared to its earnings.
- Return on Equity (ROE) – Measures profitability relative to shareholders’ equity.
- Debt-to-Equity Ratio – Evaluates a company’s financial leverage and risk.
- EBITDA Margin – Assesses operational efficiency and profitability.
- Current Ratio – Determines a company’s ability to cover short-term liabilities with short-term assets.
By keeping an eye on these metrics, investors can make informed decisions when selecting stocks benefiting from Budget 2025’s PLI expansion.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.