Shares of Kaynes Technology India rose 6% on Tuesday after the central government approved the company's semiconductor plant in Gujarat.

What Happened: The Union Cabinet approved the proposal of Kaynes Semicon to set up a semiconductor plant in Sanand, Gujarat, the company said in a regulatory filing after market hours. 

The plant will incur an investment of ₹3,300 crore and will have a capacity of 60 lakh chips per day. The chips produced from the units will be used in segments such as industrial, automotive, electric vehicles, consumer electronics, telecom, mobile phones, etc., the company said in its press release. 

The plant is part of the Programme for Development of Semiconductors and Display Manufacturing Ecosystem in India which was initiated in 2021 with a total outlay of ₹76,000 crore. 

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The Union Cabinet approved the first proposal for setting up semi conductor plant in Sanand in June 2023. In February 2024, three more plants were approved with Tata Electronics setting up a semiconductor fab in Dholera, Gujarat and one semiconductor unit in Morigaon, Assam and CG Power building a semiconductor unit in Sanand, Gujarat. 

Brokerage Views: Kotak Institutional Equities maintained "add" and hiked the target price to ₹4,950. Outsourced Semiconductor Assembly and Test plant is a potential game changer for Kaynes, the brokerage said.

The ability to scale up margins and return ratios in line with global peers remains key for the company, the research firm added. The company’s diversification into new areas such as smart metering is a near-term catalyst for the company, Kotak said.

Price Action: Shares of Kaynes Technology India rose 6.59% to ₹4,970 on Tuesday morning. 

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