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PN3 Relaxation: Accelerating FDI Inflows, Unlocking Strategic Partnerships

ICICIdirect Research 13 Mar 2026 DISCLAIMER

India has relaxed certain FDI restrictions for countries sharing land borders with India, by amending the Press Note 3 (PN3) framework. The PN3 rules were originally introduced in 2020 with government approvals required to restrict opportunistic acquisitions and potential hostile takeovers by investors from neighbouring countries.
Under the revised rules, global investors with up to 10% non-controlling beneficial ownership from land bordering countries can now invest through the automatic route, while more importantly, larger strategic proposals in selected manufacturing sectors such as capital goods, electronic components, and solar manufacturing will be eligible for expedited government approval within ~60 days. Currently, around 600 total investment proposals are awaiting approvals, and a shorter approval timeline in these select sectors is expected to help Indian companies accelerate technology partnerships, deepen component localisation and support broader growth of India’s manufacturing ecosystem.
Within the electronics manufacturing services (EMS) ecosystem, Dixon Technologies could be a key beneficiary, as approval for proposed JV with Vivo is pending and going ahead display fabrication partnership with HKC is likely to have clarity on approval. Vivo JV is expected to add ~1.8 cr smart phone volumes to its FY26E volume of ~3.4 cr. Besides, Dixon recently got PN3 approval for display module which shall support its margin improvement. Similarly, PG Electroplast could also benefit if approvals for its collaboration with Highly Group w.r.t. compressors moves faster. Other EMS companies like Kaynes have also indicated an opportunity to partner with Chinese companies to strengthen their role in value chain.  
We have BUY rating on Dixon Technology, Syrma, Amber and Kaynes among EMS companies.
Capital Goods & Power : The policy relaxation in strategic sectors such as capital goods manufacturing, polysilicon and wafer manufacturing (solar supply chain), and advanced battery components aims to reduce approval bottlenecks, attract minority foreign investors, and accelerate manufacturing investments in power equipment, solar, and battery ecosystems. This policy relaxation is incrementally positive for India’s manufacturing and capital goods sectors, as it could unlock delayed FDI inflows, encourage global technology partnerships and joint ventures, and support capacity expansion for companies such as BHEL, Siemens India, Schneider, Waaree Energies, Tata Power, CG Power, and ABB India. We have Buy rating on BHEL.

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