Telecom stocks gain up to 5% after government extends PLI scheme by a year – Brokerage picks Airtel as best bet

Shares of Telecommunication companies surged up to 5 per cent on the BSE intraday during Tuesday’s trading session after the government on Monday announced design-led incentive scheme and extended the duration of the Production-Linked Incentive (PLI) scheme by a year. 

Individually, Tata Teleservices (Maharashtra) shares gained over 5 per cent, followed by HFCL shares up nearly 5 per cent intraday. While cash-strapped Vodafone Idea gained over 3 per cent and Tata Communications up around 2.5 per cent intraday on the BSE. 

Similarly, telecom major Bharti Airtel and Indus Towers each gained between 1-2 per cent on the BSE intraday on Tuesday. 

The Department of Telecom has launched an incentive scheme for design-led manufacturers and extended the duration of the Rs 12,195 crore production-linked incentive (PLI) scheme by a year, an official statement said on Monday. 

The incentive for design-led manufacturing is part of the PLI scheme which was notified on February 24, 2021. The DoT has amended the clause and made the scheme effective from April 1, 2022. 

Telecom equipment makers who use 50 per cent of Made in India components in their products will be eligible for the design-linked incentive. The new version of telecom PLI heeded to the demand of domestic manufacturers by removing the 15 per cent cap on investment to be made for R&D. 

Earlier last week, the Cabinet approved a 5G spectrum auction, with DoT releasing a Notice Inviting Application (NIA) for the auction of 5G spectrum. The same is slated to be conducted on July 26, 2022, to facilitate the rollout of 5G mobile services in India. 

Global investment banking firm Nomura believes Bharti Airtel and Reliance-Jio’s market share gains could likely accelerate further at Vodafone Idea’s expense, and Indian telecom market could end up as a virtual duopoly. Bharti remains our preferred pick among listed Indian telcos, it said.