The Chennai-based Murugappa Group has recently made a significant announcement that it will be investing $791 million over the next five years to enter the semiconductor assembly and testing space. This move will be conducted through CG Power and Industrial Solutions, a company set up by Crompton Greaves. The project is expected to be funded through a combination of subsidies, joint venture partners’ equity contributions, and debt. In line with this, the company is currently in discussions for a joint venture and has applied for a subsidy with the Ministry of Electronics and Information Technology (MeitY) under the Modified scheme for semiconductor facilities in India.
The announcement of this investment resulted in a significant surge in the share prices of CG Power, increasing by about 20% to Rs 469. The company has a market value of around ₹7,000 crore and is applying for subsidies for an ‘outsourced semiconductor assembly and testing’ (OSAT) facility in India. This initiative is in sync with the rapidly growing global OSAT market, which is expected to reach $76.23 billion by 2028. The Indian semiconductor market itself, valued at $15 billion in 2020, is projected to grow to $63 billion by 2026.
Furthermore, the announcement added approximately $3 billion in market value to the Murugappa Group. This is a significant stride for the group, traditionally involved in diverse sectors such as tubes, cycles, fertilizers, chemicals, sugar, abrasives, and financial services. The group’s shift towards emerging opportunities, including semiconductors, is part of its broader strategy to diversify into new sectors such as e-mobility, phase-changing chemicals, drones, mobile phone cameras, and online payment gateway services. The expansion aligns with the Indian government’s Semicon India program, which has earmarked ₹76,000 crore to support companies venturing into semiconductors, offering substantial fiscal support.
This move by Murugappa Group reflects India’s broader ambition to establish a robust tech manufacturing sector, attracting investments from major global players and offering new opportunities for investors in a sector that has seen substantial growth in stock values globally. The venture, while capital intensive and with a longer payback period, represents a significant commitment to technology collaboration with global players and a strategic move into a high-value, rapidly evolving industry.