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Union Budget 2013‐14 (First cut)                          Credible and balanced budgetEdelweiss Research                  ...
Union Budget FY14: Highlights Fiscal math largely credible. Revenue slightly aggressive, but expenditure and subsidies wel...
Fiscal math looks largely credible Fiscal math largely credible   Fiscal consolidation process continues, although at a bi...
Minor changes in taxesSlight changes in direct and indirect taxes  Minor changes in the direct taxes. Surcharge raised to ...
Few positive announcements…  Positive for investment   Investment allowance of 15 % in FY14 and FY15 to manufacturing comp...
Fiscal deficit likely to be ~5% of GDP in FY14       Fiscal Deficit FY14 at 5.0% of GDP                                   ...
Borrowing could exceed by ~INR 200bn                Funding the Fisc                                                      ...
Comparison to pre‐crisis periodRevenues still long way to go                                                              ...
FY13 : Significant consolidation in 2H In 2H FY13 government undertook aggressive fiscal consolidation to achieve gross fi...
Sector-wiseSector wise Announcements                            10
AutomobilesSector   Industry/market wishlist                           Edelweiss expectations                Announcements...
BFSISector   Industry/market wishlist         Edelweiss expectations                    Announcements in Budget           ...
BFSI‐contd.Sector   Industry/market wishlist   Edelweiss expectations        Announcements in Budget                    Im...
Capital Goods Sector      Industry/market wishlist                       Edelweiss expectations               Announcement...
CementSector   Industry/market wishlist                              Edelweiss expectations        Announcements in Budget...
Consumer GoodsSector    Industry/market wishlist                           Edelweiss expectations                  Announc...
ConstructionSector       Industry/market wishlist                      Edelweiss expectations        Announcements in Budg...
ITSector   Industry/market wishlist                             Edelweiss expectations                    Announcements in...
MediaSector   Industry/market wishlist                            Edelweiss expectations                Announcements in B...
Metals & MiningSector    Industry/market wishlist                           Edelweiss expectations             Announcemen...
Oil & GasSector    Industry/market wishlist                                  Edelweiss expectations                   Anno...
PharmaSector       Industry/market wishlist                           Edelweiss expectations                 Announcements...
Real EstateSector   Industry/market wishlist                             Edelweiss expectations        Announcements in Bu...
Power & InfrastructureSector   Industry/market wishlist   Edelweiss expectations        Announcements in Budget           ...
RetailSector   Industry/market wishlist                          Edelweiss expectations                      Announcements...
TelecomSector    Industry/market wishlist   Edelweiss expectations        Announcements in Budget               Impact on ...
DisclaimerThis document has been prepared by Edelweiss Securities Limited (Edelweiss). Edelweiss, its holding company and ...
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Union Budget '13 Review (First Cut)

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A first cut review of the Union Budget 2013, this presentation will give you quick highlights of the revisions that affect you.

Check out the companies and sectors that got positively influenced and the ones that didn't.

Get a view of how the budget fared in comparison to the pre-crisis period of before FY '08 to get a unique perspective on how the economy has fared.

Understand how the report states the Union budget looks like a credible and balanced budget in conclusion.

Published in: Economy & Finance
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Union Budget '13 Review (First Cut)

  1. 1. Union Budget 2013‐14 (First cut) Credible and balanced budgetEdelweiss Research February 2013
  2. 2. Union Budget FY14: Highlights Fiscal math largely credible. Revenue slightly aggressive, but expenditure and subsidies well provided for.  Consolidation process continues. Fiscal deficit for FY14 budgeted at ~4.8% of GDP (our estimate ~5.0% of  GDP). GDP) Budgeted net borrowing is at ~INR 4.8tn. We believe it could be a bit higher by ~INR200bn. However, gross  borrowing came higher than expected as government intends to rebalance the maturity profile of debt.  Budget was growth supportive as it intended to support investments through  extra tax exemptions for  investment in plant and machinery. Further, it substantially raised the limits of tax‐free infra bonds. Some attempt has been made to boost financial savings by liberalising coverage of Rajiv Gandhi Equity  p g y g g j q y Scheme (RGES) and insurance sector. Further, the finance minister announced that inflation indexed bonds  will be introduced possibly with the intent to curb gold imports.  While the finance minister cited CAD as a big worry, no export boosting measures were announced. While the finance minister cited CAD as a big worry, no export boosting measures were announced. Positively impacted companies are:  Capital goods companies namely Thermax, Cummins, ABB and Siemens Refiners namely IOCL, BPCL, HPCL, MRPL and RIL Housing finance companies namely LIC Housing Finance, Gruh Finance and Dewan Housing Bus manufacturers namely Ashok Leyland, Tata Motors and Eicher Motors Affordable housing developers namely Jaypee Infratech & Puravakankara Projects 2
  3. 3. Fiscal math looks largely credible Fiscal math largely credible Fiscal consolidation process continues, although at a bit slower pace compared to FY14. The FM has announced gross fiscal  deficit for FY14 at 4.8% of GDP (against 5.2% of GDP in FY13). Broadly speaking the Budgeted fiscal target is certainly in the realm of possibility, we think that fiscal deficit of 5% of GDP is  more realistic.  Revenue slightly aggressive  Gross tax revenue collection of the government will improve on account of better tax buoyancy on account of improving  economy and some changes in the taxes, which will add to government kitty. However, the benefits of headline tax rate  hikes in indirect taxes last year will be absent in FY14. Overall, we think that 18% YoY growth in tax revenues is more  realistic compared to 19% YoY assumed by the government (against ~17% YoY achieved in FY13). p y g ( g ) On non‐tax revenues side as well, we think FM has been a bit aggressive, particularly with regards to telecom revenues  . Expenditure does not seem to be under‐budgeted Budgeted growth of 16% YoY in expenditure is sizeable and we do not see any material risk of slippage on this front Budgeted growth of 16% YoY in expenditure is sizeable and we do not see any material risk of slippage on this front.  Subsidies (at ~2% of GDP) have been adequately provided especially given that government is undertaking periodic diesel  price hikes. Meanwhile, sharp cuts in plan expenditure undertaken in FY13 are being compensated by budgeting 29% YoY growth in  FY14. Some of this is related to substantial increase in rural development spending. FY14 S f hi i l d b i li i ld l di 3
  4. 4. Minor changes in taxesSlight changes in direct and indirect taxes Minor changes in the direct taxes. Surcharge raised to 10% from 5% on corporate taxes. Surcharge introduced on super rich  (income above INR 10mn)  No changes in headline indirect taxes rates.  Voluntary compliance encouragement scheme introduced in service taxes for the defaulters.  DTC bill to be introduced in this budget session itself. GST no specific time‐frame for implementation mentioned. However, FM mentioned that significant progress has been   made and he hoped to introduce constitutional amendment and draft bill in GST in coming months.  4
  5. 5. Few positive announcements…  Positive for investment Investment allowance of 15 % in FY14 and FY15 to manufacturing companies which invest more than INR1bn in plant  and machinery.  Tax free infra bonds to increase from INR250bn to INR500bn. T f i f b d t i f INR250b t INR500b Road regulator to iron out issues in the sector. Incentives to boost financial savings RGES scheme to incentivise households savings in equities and mutual funds broadened in coverage. Announcement to introduce  inflation indexed bond.  Certain steps to increase the coverage of insurance. Others Additional tax deduction for first time house buyer (loan up to INR 2.5 million) 5
  6. 6. Fiscal deficit likely to be ~5% of GDP in FY14 Fiscal Deficit FY14 at 5.0% of GDP (INR bn) Particulars FY14 (Edel) FY14 (BE) FY13 (RE) FY13 (BE) FY12 (Actual) Tax revenue (net) 8,741 8,841 7,421 7,711 6,297       ‐ Direct tax 6,654 6,709 5,685 5,676 4,967      ‐ Indirect tax Indirect tax 5,565 5,650 4,695 5,054 3,924    Less : Assignment to states 3,478 3,518 2,959 3,019 2,595 Non‐tax revenue receipts 1,624 1,723 1,297 1,646 1,217           of which telecom & 3G 300 408 194 580 174 Capital receipts 605 665 381 417 369       of which disinvestment of which disinvestment 400 400 240 300 181 TOTAL RECEIPTS 10,970 11,228 9,099 9,774 7,883 Non‐plan expenditure 11,078 11,100 10,016 9,699 8,920    a) Total subsidy 2,360 2,311 2,577 1,900 2,179    ‐ Food subsidy Food subsidy 950 900 850 750 728     ‐ Fertilizer subsidy 660 660 660 610 700     ‐ Oil Subsidy  650 650 969 436 685    ‐ Interest and others subsidy 100 101 98 104 66 b) Interest payments 3,707 3,707 3,167 3,198 2,732 c) Other revenue expenditure c) Other revenue expenditure 3,911 3 911 3,911 3 911 3,454 3 454 3,557 3 557 3,210 3 210 d) Capital expenditure 1,100 1,171 819 1,043 799 Plan expenditure 5,553 5,553 4,292 5,210 4,266     ‐ Revenue 4,433 4,433 3,434 4,205 3,337     ‐ Capital 1,121 1,121 858 1,005 786 TOTAL EXPENDITURE TOTAL EXPENDITURE 16,631 16 631 16,653 16 653 14,308 14 308 14,909 14 909 13,186 13 186 Fiscal deficit 5,662 5,425 5,209 5,135 5,303 Revenue defcit 4,046 3,798 3,912 3,503 3,944 Revenue deficit/GDP (in %) 3.6 3.3 3.9 3.4 4.4 Fiscal deficit/GDP (in %) Fiscal deficit/GDP (in %)                      5 0 5.0 4.8 4 8                       5 2 5.2                      5 1 5.1                      5 9 5.9 RE: Revised Estimates          BE: Budget Estimates Source: Budget documents, Edelweiss research 6
  7. 7. Borrowing could exceed by ~INR 200bn Funding the Fisc FY14 (Edel) FY14 (BE) FY13 (RE) Gross market borrowing                   6,527                      6,290                      5,580        ‐ Net market borrowing Net market borrowing                 5 077                   4 840                   4 674 5,077 4,840 4,674 Net short term (T‐bill)                       198                         198                         457 Small savings scheme                          58                            58                            86 Others                       329                         329                             (8) Fiscal deficit Fiscal deficit                 5 662                   5 425                   5 209 5,662 5,425 5,209 RE: Revised Estimates          BE: Budget Estimates Source: Budget documents, Edelweiss research Net budgeted market borrowing of INR 4.8tn (vs INR 4.67 in FY13) was inline with the market expectation  However, gross borrowing came much higher than the expectations of ~INR 5.75tn  Th i f hi h b i i b b k/ it hi ( t ~INR500b ) hi h ill b i d The main reason for higher gross borrowing  is buyback/switching (extra ~INR500bn)  which will be carried  this year for better debt management. 7
  8. 8. Comparison to pre‐crisis periodRevenues still long way to go Expenditure reined back close to pre‐crisis levels 13.5 17.0 12.0 15.6 ) (as % of GDP)(as % of GDP) 10.5 14.2 9.0 12.8 7.5 11.4 6.0 10.0 FY14(Edel) FY14(Edel) FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Gross tax as % of GDP G % f GDP Total expenditure as % of GDP T l di % f GDP F F Source: CMIE, Edelweiss research 8
  9. 9. FY13 : Significant consolidation in 2H In 2H FY13 government undertook aggressive fiscal consolidation to achieve gross fiscal deficit  of ~5.2% of  GDP in FY13 (vs Budgeted ~5.1% of GDP).  The consolidation was undertaken mainly via reductions in expenditure (especially plan expenditure). The consolidation was undertaken mainly via reductions in expenditure (especially plan expenditure) Deficit as % of budgeted fiscal  deficit 130  fiscal  as % of Budgeted f 106  deficit) 82  58  (Fiscal deficit a 34  10  Apr. Sept. Jun. Mar. Dec. Jul. Aug. Oct. May Nov. S FY13  FY12 Source: CMIE, Edelweiss research 9
  10. 10. Sector-wiseSector wise Announcements 10
  11. 11. AutomobilesSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyAuto Relief in excise duty. Not likely. Increase in excise duty to 30% on non‐ Marginal negative for M&M as we  taxi SUVs in 27% bracket.  expect the additional levies to be  passed on to the customer. Clarity on diesel passenger vehicle taxation. Diesel tax on higher capacity SUVs  No announcement. Positive for M&M. was expected  Benefits in tax and R&D expenditure to electric  Likely. No announcement. Marginal negative for M&M. vehicles. To provide INR149bn for JNNURM (to  Positive for Ashok Leyland, Tata  purchase upto 10k buses, especially  Motors, Eicher Motors. by hill states). by hill states) To increase tax rate on payments of  Neutral for Maruti as applicable rate  royalty/technical fees to non‐ will be the rate of tax stipulated in the  residents from 10% to 25%. DTAA (10% between India and Japan). Custom duty hike from 75% to 100%  Neutral. on luxury cars (CIF value above  on luxury cars (CIF value above USD40k). Custom duty hiked from 60% to 75%  Neutral. on bikes above 800cc engine capacity. Excise duty on truck chassis reduced  Neutal. from 14% to 13%. 11
  12. 12. BFSISector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyBFSI Banks lending to power sector • Sectoral exposure limit for banks in  case of lending to power sector can be  relaxed to facilitate fresh lending.  • Long term base rate to be introduced  for infrastructure projects which  should be delinked from bank base  rates in order to provide stable  interest charges for projects Tax sops on fixed deposits • Increasing the TDS limit on fixed  deposit to Rs 25,000 from 10,000 at  d it t R 25 000 f 10 000 t present.  • Tax break on longer tenor to provide  some relief to ALM:  Considering low  deposit mobilization and lending  skewed towards longer tenor assets g Commodities Transaction Tax Levy of CTT on commodity trading Proposal to introduce Commodities  Negative for MCX as it impacts the  Transaction tax (CTT) in a limited way.  jobbing volumes and increases cost of  0.01% of the value of the contract  trading on MCX vis‐à‐vis international  implemented exchanges. However, on the positive  side with the introduction of CTT, the  bill now also specifies that  commodities trading will not be  considered a speculative transaction  and hence CTT paid by the assessee  along with losses incurred, if any can  now be adjusted against other  now be adjusted against other business income thereby leading to tax  benefits. 12
  13. 13. BFSI‐contd.Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyBFSI Interest subvention scheme for ST  Positive for private banks as they too  crop loans to be continued and to be  can offer the lucrative scheme to  extended to Private SCBs as well. farmers. A brief description of the  scheme‐Under this loans are provided  by banks to farmers at 9% and if the  repayment is done within the agreed  time frame, the farmer ends up paying  only 4% RoI while the bank can claim  another 5% from the government via  RBI. While now private banks too can  RBI. While now private banks too can offer this scheme we believe they are  under no compulsion to do so. Additional deduction of interest upto  Positive for home loan financiers in  INR0.1mn for first home loan (of less  the category of INR2.5mn and below,  that INR2.5mn) sanctioned in FY14.  h INR2 5 ) i d i FY14 namely LICHF, Dewan Housing, Gruh  l LICHF D H i G h Value of property to be less than INR 4  Finance. SBI too stands to benefit to a  mn limited extent on the home loans  portfolio. FIIs to be permitted to trade currency  Positive for MCS‐SX, however the limit  g derivatives on exchange to the extent  to the extent of their exposure only  p y of their Indian rupee exposure in  limits the overall volume expansion India Infrastructure tax‐free bonds of  Though the eligible limit of INR500bn  INR500bn can be issued in FY14 is lower than the INR600bn of last  fiscal, given that only INR250bn is  likely to be mobilized under this head  lik l t b bili d d thi h d of the total limit the reduction in  overall limit is unlikely to have any  impact 13
  14. 14. Capital Goods Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/company Capital   Increased allocation to strenghthening T&D   Increased allocation to   No annoucement   Negative Goods  network to cut AT&C losses  strenghthening T&D network to cut  AT&C losses   Investment Allowance @15% on   Positive for  Capital equipment  investments in new Plant &  companies like Thermax, Cummins,  Machinery worth INR 1bn and above  ABB, Siemens, etc.   Tax on royalty payments by Indian   Marginally negative for Cummins  subsidiary hiked to 25% from 10%  India   Increased allocation of Capital   Positive Bharat Electrnoicsand Larsen  Expenditure in defence (INR 867bn ,  Expenditure in defence (INR 867bn , & Toubro  & b 25% YoY growth) in FY14E  14
  15. 15. CementSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyCement Reduction in excise duty on cement and  No change. No change. simplification of the duty structure to specific  rate per MT against the current complex  structure of charging it on ad‐valorem cum  specific duty basis and further relating it to the  Abolition of import duty on pet coke and levy of  No change. No change. customs duty on cement imports. Classify cement as Declared Goods under  No change. No change. Section 14 of the Central Sales tax Act to put it  on equal footing with other core sector goods  like coal and steel. Customs duty on steam coal hiked by  The impact will be marginal in the  2% and CVD by 1%. INR0.3‐0.8 range per bag of cement. No incremental impact on ACC and  No incremental impact on ACC and Tax on royalty payments hiked to 25%  Ambuja Cement as India has DTAA with  from 10%. Switzerland capping the tax at 10%. 15
  16. 16. Consumer GoodsSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyConsumer  Rural initiatives on income generation. We expected this to continue, though  Contribution to MNREGA scheme  Rural growth has been growing ahead Goods growth could moderate. maintained at INR330bn (no  of urban growth which is likely to  increase), in line with expectations. continue. No increase in excise duty on cigarettes. Increase in exercise duty by 8‐ Excise on cigarettes increased 18% on  The hike is sentimentally negative for  10% for cigarettes was expected. all segments except below 65mm. all cigarette companies, especially the  smaller players as this is second year  of harsh Budget for cigarettes. ITC will  need to hike price ~13% to offset this  excise rise to maintain EBIT margin at  excise rise to maintain EBIT margin at the current 32.3%; ITCs strong pricing  power will have little impact on  volumes, though no change in sub  65mm category will prop volumes. An upward revision in the income tax exemption  p p We expected an increase as it would  p Tax credit of INR2,000 for income up  , p We expect this step to marginally  p p g y limit. be a step towards direct tax code. to INR500,000 (leading to effective  increase disposable income of the  exemption of INR220,000 for  urban poor/urban middle class which  individuals with income less than  will help boost Consumer spending to  INR500,000). some extent. Rate of tax increased from 10% to 25%  No significant impact on most  on royalties and technical fees paid  li d h i lf id companies (HUL, Colgate) due to DTAA  i (HUL C l )d DTAA to non‐resident. This will be effective  rate over‐riding the enhanced rate.  as per government note from April 1,  Since it is applicable from FY15 there  2014 (i.e. FY15). is no near term impact. 16
  17. 17. ConstructionSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyConstruction Steps to lower borrowing costs by allowing  Unlikely. No announcement. Neutral. refinancing of INR term loans through ECBs. Government will constitute a  Positive as it will increase  regulatory authority for the road  regulatory authority for the road accountability and transparency in the  accountability and transparency in the sector. system. 3,000 km of road projects will be  Positive for the sector as it will  awarded in the first six months of  increase order flow. 2013‐14. 17
  18. 18. ITSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyIT MAT on SEZ income to be withdrawn as it is  Did not expect to occur No announcement counter to the long‐term policy announced by  the Government through the SEZ Act.  Alternatively, MAT should be withdrawn at least  in respect of SEZs which have already been  notified so that economic viability of these SEZs  is protected Denial of tax deductions for onsite  The expectation was that onsite  No announcement services.With the sunset of STP benefits, there  services will be treated as exports of  has been denial of tax deductions for onsite  services and not as export of  services on one pretext or the other, which the  manpower exporters of IT services are entitled to.  Increase in surcharge to result in  Marginally negative impact 1.3% average tax increase as some  portion of the income is on MAT and  majoiity on Non MAT. j iit N MAT 18
  19. 19. MediaSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyMedia Subsumption of service tax and entertainment tax  Unlikely as it also depends on the  No announcement No impact in GST. implementation of GST which has  been pending for a few years. Reduction of customs duty on digital head ends  y g Unlikely as it will put additional  y p Customs duty on set top boxes  y p This will be a negative (~INR65 impact)  g ( p ) and set top boxes. burden on the government and  increased from 5% to 10% to promote  for cable and DTH companies as  discourage domestic production of  domestic production of set top boxes. almost all set top boxes are imported.  STBs. We expect all companies to pass this  hike to consumers. FM Phase 3 auctions will be  Positive for ENIL, Next Mediaworks and  conducted in FY14. 294 cities  d t d i FY14 294 iti RBNL. Also, slightly positive for  RBNL Al li htl iti f (population > 0.1mn) will have 839  companies like Sun TV, DB Corp and HT  FM stations. Media which have small FM radio  operations as a % of total sales. Temporary transfer or permitting the  Likely negative for broadcasters as  use or enjoyment of a copyright  movie acquisition costs might increase  relating to cinematographic films was  due to higher service tax. Likely minor  fully exempt from service tax; now,  negative for DTH/cable operators who  this exemption will be restricted to  provide pay‐per view facility.  exhibition of cinematograph films in  movie theatres. 19
  20. 20. Metals & MiningSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyMetals  Steel ‐ increase in import duty to 10% from 7.5% Low probability No change Noneand Mining Removal of steel imports from free trade  Unlikely. Measure also requires  No change None agreements (FTA) concurrence of foreign countries Implementation of zero import duty on import  Likely Import duty on all thermal coal  Sentimentally positive for Coal India of  certain grades of coal grades at 2% Imposition of 4% excise duty on silver  Negative for HZL and Sterlite produced from zinc/lead ore Increase in customs duty for aluminium from  Unlikely No change None 5% to 10% Iron ore ‐ reduction in export duty (currently  Unlikely No change None 30%) 20
  21. 21. Oil & GasSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyOil & Gas Removal of National Calamity Contingent Duty on  We did not expect any changes on the  No announcement Crude Oil levied @ Rs.50/MT. same. Extension of 100% Excise Duty Concession to North  Should happen, maybe partial say  No announcement East Refineries. 50% or 75% Declared Goods status to Natural Gas and LNG Declared Goods status to Natural Gas and LNG No changes No changes No announcement No announcement Extension of Infrastructure Status to Gas projects  No changes No announcement such as LNG terminals for the purpose of 10‐year tax  holiday under Section 80‐IA Extension of 7 year tax holiday on refineries from  No changes No announcement March 2012 to March 2017 100% Depreciation on Fuel quality up‐gradation  100% Depreciation on Fuel quality up‐gradation No changes No changes No announcement No announcement projects Include petroleum products in GST, while addressing  No changes No announcement the concern of states through levy of an additional  tax None Import duties on crude to increase  No announcement No changes. This is positive for refining  from 0% to 2.5%. Also increases  from 0% to 2 5% Also increases companies (IOCL, BPCL, HPCL, MRPL, RIL)  companies (IOCL BPCL HPCL MRPL RIL) import duties on all products by 2.5%  as the current duty differential of ~2% is  except diesel, LPG, Kerosene maintained ‐ PSC for NELP blocks will in future be  Revenue sharing model will ease the  moved from profit petroleum sharing  capex approval process. If the  to revenue sharing model Rangarajan Panel recommendations on  ‐ Shale gas policy to be announced  Shale gas policy to be announced natural gas pricing are approved, it will  natural gas pricing are approved it will soon be a positive for RIL and ONGC. Any  ‐ Natural gas pricing policy will be  approvals by CCI for NELP blocks will  reviewed soon lead to exploration activities picking up ‐ Cabinet Committee on Investment  (CCI) will meet to clear hurdles in  exploration/development of NELP  l ti /d l t f NELP blocks Investment allowance of 15% on new  The same is positive for sector but more  plant & machinery acquired and  for RIL. RIL has planned $12bn capex  installed in FY14 and FY15, and worth  and most of the same is expected to be  INR 1bn and above commercial 2015 end. 21
  22. 22. PharmaSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyPharma Rolling out of universal access programme to  Important to see if private sector  Healthcare expenditure  increased  Positive as it increases the reach for  essential medicines with an outlay of INR5,000‐ players will be part of the  from INR30,000 crores to  medicines thereby improving  6,000 crores p.a. (0.1% of GDP). procurement for access to essential  INR37,330crores (increase of 24%);  penetration levels in both urban and  medicines. overall, the expenditure under  rural areas. National Health Mission increased to   N i l H l h Mi i i d INR21,200 crores and will include  both rural and proposed urban  mission. Increase weighted deduction on R&D to 300%  No announcement. from current 200%. Revisit the MAT currently being levied on SEZs,  Increase in surcharge from 5% to 10%;  a) Negative impact of 0.4% increase in  given industry has high investment in SEZs. investment allowance of 15% over  MAT rate to an extent that domestic  current depreciation on capex of  accounts for 40% of total business.  INR100 crores and more on P&M. b) Investment allowance does not  benefit as most companies pay tax at  benefit as most companies pay tax at MAT. Remove excise duty disparity between API and  We expected this in order to reduce  No change in the duty structure. formulations. disparity in the MODVAT structure.Healthcare  Increase in exemption limit under Section 80D  Likely. More insurance penetration in Tier ‐II   Improve affordability for quality (hospitals) for health insurance. cities without prior approval of IRDA  healthcare in these towns that are  and health cover under social  target areas for growth by specialty  security package for unorganized  hospitals. sector.  Priority sector status to healthcare including  hospitals and diagnostics. Increase in surcharge from 5% to 10%. Increase in surcharge from 5% to 10%. Negative impact with increase in tax  Negative impact with increase in tax rate by 1% as most profit comes from  domestic business.  22
  23. 23. Real EstateSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyReal  Give infrastructure status to affordable housing  Likely Current sops for affordable housing  No ImpactEstate segment. to continue. Tax exemptions for small houses (under‐60  Likely No announcement. No Impact sq.m carpet area) and special housing zones. Increase in exemption limit on interest  Not likely Additional interest deduction of  Positive for Jaypee Infratech (BUY) and  payments on mortages. INR100,000 for housing loans up to  Puravakankara Projects (Unrated).   INR2.5mn taken  for first home from  Other listed companies do not have a  the period 1.4.13 to 31.3.14. significant presence in <INR3mn  segment Industry status to real estate.  Industry status to real estate. Not likely Not likely No announcement. No announcement. No Impact. No Impact. Implementation of REITs so that small investors  Not likely No announcement. No Impact. will get a chance to invest in real estate assets. Surcharge on taxes for higher income groups. Likely Surcharge of 10% for persons whose  Minimal impact as segment is not  taxable income exceeds INR10mn per  price sensitive / does not face  year. affordability issues. Urban housing fund to be set up by  Ub h i f d b b Unlikely to impact listed space. U lik l i li d NHB for INR20bn. TDS to be deducted at a rate of 1% for  Could impact demand for real estate  transfer of immovable property (other  properties in NCR and partially in  than agriculture land), where the   Mumbai with a possible fall in  consideration exceeds INR5mn. speculative transactions. p Houses above 2,000 sq ft or above  To impact costs by ~0.6%. Expected to  INR1crore to have lower abatement of  be passed on to end users.  70% against 75%. Sentimentally negative for DLF, Oberoi. 23
  24. 24. Power & InfrastructureSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyPower 2% customs duty imposed on thermal  PPAs have a clause to pass on such  coal imports (earlier nil) & CVD  increase in cost to procurers. However,  increased to 2% from earlier 1%. this is negative for developers having  merchant contracts. Negative for JSW  Energy and PTC India. Sec 80 IA benefits extended and DDT  Positive ‐ on expected lines exempted for dividend from foreign  companies by another year  24
  25. 25. RetailSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyRetail Clarity on nuances of norms (sourcing, back  Mirroring proactiveness in promotion  No announcement. Confusion persists regarding FDI  end investment, etc.) for FDI in multi brand  of FDI in single‐brand retail, we  norms; will continue to await clarity. retail. expected government to provide  clarity on norms on FDI in multi‐ No further regulations to curb gold demand; in  We had not ruled out stricter  No changes announced. Positive for branded jewellers who  January 2013, government had hiked import  regulations like reduction of credit  were fearing stricter rules duty on gold from 4% to 6%. period by domestic banks provided to  jewellers (from current 180 days  credit to 90 days), mandatory quoting  of PAN numbers for high value  of PAN numbers for high value purchases and to introduce gold‐ linked financial instruments to divert  savings from physical gold to bonds. An upward revision in the income tax exemption  We had expected an increase as it  Tax credit of INR2,000 for income up  We expect this reforms to marginally  limit. limit could be a step towards direct tax  could be a step towards direct tax to INR500,000 (leading to effective  to INR500 000 (leading to effective increase disposable income of the  increase disposable income of the code. exemption of INR220,000 for  urban poor/urban middle class which  To further reduce central excise duty on  We had belived this was unlikely due  Zero excise duty route, as existed  This is clearly positive for branded  branded clothes (effective excise duty reduced  to ballooning fiscal deficit and the  prior to Budget 2011‐12, is being  garment players and also retailers like  by 90bps from 4.5% on 3.6% on apparel retail  fact that there was cut initiated in the  restored in respect of branded  Pantaloons and Shoppers Stop p price in the last budget). g ) last budget. g readymade garments and made ups. y g p GST roadmap laid down This is a clear positive for Retail  players. Service tax will be leviable on taxable  This will be negative for QSRs and fine‐ service provided in restaurants with  dining with air‐conditioning  air conditioning or central air heating  air‐conditioning or central air heating in any part of the establishment at  any time during the year. 25
  26. 26. TelecomSector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyTelecom Increase in surcharge to result in  Marginally negative impact 1.6% average tax increase. 26
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