some populism but keen eye on long-term growth
TRANSCRIPT
Some populism but keen eye on long-term growth
INSTITUTIONAL EQUITY RESEARCH
Page | 2 | PHILLIPCAPITAL INDIA RESEARCH
Union Budget 2018-19
Some populism but keen eye on long-term growth
INDIA STRATEGY | Post Budget Review
1 February 2018
As expected, the budget was coloured with populist measures such as increasing MSP for kharif crops by c.18% and higher allocations to the rural economy. Long Term Capital Gains Tax is an ephemeral negative for the markets, but was expected to some extent. FY18 fiscal deficit target was revised to 3.5% from 3.2% and there are some doubts about the government’s ability to achieve targeted fiscal deficit because GST collection target for FY19 is higher. However, the budget has not sprung any major negative surprises. It is focussed on growth and creation of jobs with measures such as lower corporate tax for firms with <Rs 2.5bn turnover, and continued focus on infrastructure creation. The government has tried to meet several key objectives to improve growth, but the efficacy will depend on a broader economic revival. We are optimistic about nominal and real growth prospects for FY19. Short-term market corrections will provide good entry points to accumulate stocks. We are positive on infrastructure, rural consumption plays, cement, and NBFCs. Our key themes from the budget of fiscal 2018 are as follows: Major thrust on the rural economy: Increase in MSP prices for kharif crops (to the tune of 18%) may not stoke high inflationary pressures as rabi MSPs are already at >1.5 cost of produce and wholesale prices for key kharif crops are already higher than the revised MSP. Nonetheless, MSP is a supporting mechanism (stabilises incomes) and other measures like introduction of price-deficiency mechanism will help in lower price volatility for agri commodities, which should help improve rural incomes. Apart from MSP, other measures include higher allocation for food processing, food parks, irrigation schemes, and animal husbandry (including fisheries). All these initiatives are well thought out schemes – a part of the government’s key policy ‘Doubling Farm Income’. Infrastructure push continues: Roads allocation has increased by 16% yoy, which, on a reasonably high base, is a significant positive. Some of the key categories in which allocations are higher are railways (+32%, but unlikely to see that much increase), Smart Cities (+54%), and shipping and aviation. However, contrary to our expectations, the budgetary allocation for rural and urban housing schemes was much lower. Nonetheless, the continued push towards infrastructure projects will create rural and urban employment. LTCG on equity will create market volatility in the short term: 10% LTCG on equity investments will create market volatility because there is only a 5% tax gap (15% short term, 10% long term). Also, without indexation benefits, the intrinsic value of LTCG is higher. Real estate and debt funds have LTCG of 20%, but enjoy indexation benefits. While intuitively, LTCG should increase the cost of equity and reduce the attractiveness of equity assets, taxation occurs only on realisation of investments; hence, its impact over the longer term could be much lower. Focus on real long-term growth and major thrust on health care: The budget made very limited changes to taxation of basic goods and introduced corrections to address market anomalies (like in short-term vehicles such as arbitrage funds) to facilitate funds movement into the real economy. The other major initiative taken by the government in the budget is to provide health insurance coverage of Rs 500 thousand per family. This policy is intended to cover 100mn poor households. Further details will emerge in the next 6 months. Key themes and stock picks from the budget:
Key budgetary beneficiaries: Infra companies, cement, NBFCs, logistics, small caps (due to the revised tax rate), and sectors/companies catering to the rural segment
Our key ideas: NCC, Ahluwalia Contract, Ashoka Buildcon, Ultra Tech, Dalmia Bharat, ITC, Escorts, M&M, Shriram Transport Finance, and M&M Financial Services.
Sectoral Impact
POSITIVE Automobiles Agri & Inputs Banks and HFCs Cement FMCG Healthcare Infrastructure Midcap NBFC NEUTRAL Capital Goods
India Research Team
Page | 3 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
FY19 Macro Budget Review Poor in quality despite fiscal slippage in FY18-19 While headline fiscal deficit numbers are as expected, details are not encouraging. Fiscal deficit slipped by 30bps in FY18, and despite that, capital expenditure took a beating. This was unlike previous years when capital expenditure used to be slashed to maintain fiscal prudence. Similar story in FY19 – fiscal to slip, capex muted, revenue expenditure to soar. There is populism/intention to further stimulate rural India, and the taxpayers will be paying for this by way of higher cess and surcharges. Higher rural incomes (if monsoon is normal and does not disappoint) could push demand/consumption. While public capex is muted, we expect private capex to rise. Spending by the ministries should be front-loaded to show maximum impact in the election year, however, since tax collections are generally back-ended, monthly fiscal deficit will keep causing discomfort to the bond markets and availability of funds for ministries. There is a lot of concern about kharif MSP hike to 1.5x of cost – we do not see this as inflationary, as current payout is already at 1.33x; higher for key crops such as rice and pulses (see table below). Where will money be spent in FY19? Additional government spending in FY19 is at Rs 2,245bn. Its break-up: Interest (20%), food subsidy (12.9%), tax administration (12.4%), transport (12.2%), transfer to states (10%), pension (9.4%), defence (7%), agri/rural/social (3.2%/1.1%/2.5%). Minimal change in urban development (metros) and contraction in the energy sector. Where is money coming from in FY19? Additional tax revenue in FY19 is estimated at Rs 3,251bn. Its break-up – GST (92%), Road and Infrastructure Cess (33%), core income tax (15%), core corporate tax (11%), income surcharge (LTCG) (8%), education cess (7%), import duties (5%), corporate surcharge (3%), social welfare surcharge (2%), STT (1%), basic & special excise duty (ex-cess on MS/HSD) (-10%). Will this budget revive the economy in FY19? Based on the quality of spend, there does not seem to be much to boost the economy from the current prevailing and anticipated pace. Our FY19 GDP estimate is at 7.0-7.5%. Are the estimates realistic? We see risks on GST revenue, fuel subsidy, telecom auction, and LTCG surcharge. Disinvestment can be called realistic, going by FY18 performance. Where was money spent in FY18 vs. FY18 BE: Rs 710bn was spent over and above the budgeted estimates. Its distribution: Higher spend: Tax administration (+92%), pension (+23%), interest (+11%), rural dev (+10%), energy (+7%), health (+6%), police (6%). Lower spend: Transport (-24%), transfer to states (-24%), food/fertilizer subsidy (-12%), and IT and telecom (-4%). Major government schemes
Up: Urban rejuvenation mission: AMRUT (Rs 32bn), national education mission (Rs 31bn), developmental services (Rs 31bn), Green Revolution (Rs 27bn), Bharatnet (Rs 25bn), crop insurance scheme (Rs 23bn), jobs & skill development (Rs 22bn), Pradhan Mantra Gram Sadak Yojna (Rs 21bn), Pradhan Mantri Krishi Sinchai Yojna (Rs 20bn), construction of new lines (Rs 20bn), National Livelihood Mission-Ajeevika (Rs 14bn), National Social Assistance Program (Rs 12bn), LPG connection to poor households (Rs 9bn),modernisation of police forces (Rs 6bn), PMEGP (Rs 6bn), Integrated Power Development Scheme (Rs 6bn), national program of mid-day meal (Rs 5bn).
Down: MRTS and metro projects (Rs 30bn), credit support program (Rs 21bn), Gram Jyoti Yojna (Rs 16bn), Pradhan Mantra Awas Yojna (Rs 15bn), Swachh
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UNION BUDGET 2018-19 POST BUDGET REVIEW
Bharat Mission (Rs 14bn), National Health Mission (Rs 7bn), recapitalisation of PSBs (Rs 0bn)
Unchanged: MNREGA, Namani Gange - National Ganga Plan Fiscal deficit widens and consolidates: The government has projected a fiscal deficit of 3.2% of GDP for FY19 vs. 3.5% in FY18. FY18 fiscal deficit expectedly slipped to 3.5% led by lower non-tax collections and higher revenue spend (up Rs 1,073bn). Capital expenditure for FY18/18BE is lower by Rs 364bn. Revenue receipts were up by Rs 227bn (FY18/FY18BE). For FY19, revenue receipts are estimated to rise by a robust 12% and expenditure by 10%. While pace of revenue expenditure may seem lower than FY18RE, it should be noted that FY18RE itself was 3.6% higher than FY18BE. Capital expenditure rise of 10% is unimpressive due to favourable base of FY18RE. FY19BE capex spend is actually lower than FY18BE.
Tax-GDP ratio to rise to 12.1% vs. 11.6% in FY18 – optimistic due to GST estimates.
Gross market borrowing at Rs 6,055bn vs. Rs 5,990bn in FY18; we see upside risk.
Net market borrowing at Rs 4,621bn vs. Rs 4,594bn in FY18; we see upside risk as switching of securities target (Rs 719bn) is optimistic considering FY18RE performance was Rs 570bn vs. Rs 750bn FY18BE.
States’ share in taxes is assumed at 34.7%, similar to last year.
Total IEBR (including railways) for FY19 is at Rs 4782bn (up 24% yoy).
Central government fiscal account
___________Rs Bn_____________ ___________% of GDP___________ ________yoy growth (%)_______
FY17 FY18BE FY18RE FY19BE FY17 FY18BE FY18RE FY19BE FY17 FY18BE FY18RE FY19BE
Nominal GDP 151837 168475 167847 187223
11.0 11.0 10.5 11.5
Revenue receipts 13742 15158 15054 17257 9.1 9.0 9.0 9.2 15.0 10.3 9.5 14.6
Tax (net) 11014 12270 12695 14806 7.3 7.3 7.6 7.9 16.7 11.4 15.3 16.6
Non - tax 2728 2888 2360 2451 1.8 1.7 1.4 1.3 8.6 5.8 -13.5 3.9
Capital receipts 6010 6310 7123 7165 4.0 3.7 4.2 3.8 0.9 5.0 18.5 0.6
Recovery of loans 176 119 175 122 0.1 0.1 0.1 0.1 -15.4 -32.3 -0.9 -30.2
Other reciepts (mainly PSU disinvestment) 477 725 1000 800 0.3 0.4 0.6 0.4 13.3 51.9 109.5 -20.0
Borrowings and other liabilities 5356 5465 5948 6243 3.5 3.2 3.5 3.3 0.5 2.0 11.1 4.9
Total receipts 19752 21467 22178 24422 13.0 12.7 13.2 13.0 10.3 8.7 12.3 10.1
Total revenue expenditure 16906 18369 19443 21418 11.1 10.9 11.6 11.4 9.9 8.7 15.0 10.2
Total capital expenditure 2846 3098 2734 3004 1.87 1.84 1.6 1.6 12.5 8.9 -3.9 9.9
Total expenditure 19752 21467 22178 24422 13.0 12.7 13.2 13.0 10.3 8.7 12.3 10.1
Fiscal deficit 5356 5465 5948 6243 3.5 3.2 3.5 3.3 0.5 2.0 11.1 4.9
Revenue deficit 3164 3212 4389 4160 2.1 1.9 2.6 2.2 -7.7 1.5 38.7 -5.2
Effective Revenue deficit 1506 1258 2496 2207 1.0 0.7 1.5 1.2 -28.6 -16.5 65.7 -11.6
Primary deficit 549 235 640 485 0.4 0.1 0.4 0.3 -39.8 -57.3 16.6 -24.3
Gross Market Borrowing 5830 5800 5990 6055 3.8 3.4 3.6 3.2 -0.3 -0.5 2.7 1.1
Net Market Borrowing 4082 4232 4594 4621 2.7 2.5 2.7 2.5 -7.4 3.7 12.5 0.6
Source: Budget Document, PhillipCapital India Research
Gross tax components
______ ________Rs Bn_______________ ____________YoY Growth____________ _____________% of GDP_____________
FY17 FY18BE FY18RE FY19BE FY17 FY18BE FY18RE FY19BE FY17 FY18BE FY18RE FY19BE
Gross Tax Revenue 17158 19116 19461 22712 17.9% 11.4% 13.4% 16.7% 11.3% 11.3% 11.6% 12.1%
Direct Tax 8495 9800 10050 11500 14.5% 15.4% 18.3% 14.4% 5.6% 5.8% 6.0% 6.1%
Personal Income Tax 3646 4413 4413 5290 26.8% 21.0% 21.0% 19.9% 2.4% 2.6% 2.6% 2.8%
Corporation Tax 4849 5387 5637 6210 7.0% 11.1% 16.3% 10.2% 3.2% 3.2% 3.4% 3.3%
Indirect tax 8620 9269 9364 11160 21.4% 7.5% 1.0% 19.2% 5.7% 5.5% 5.6% 6.0%
GST 4446 7439 0.0% 0.0% 0.0% 67.3% 0.0% 0.0% 2.6% 4.0%
Excise Duty 3821 4069 2770 2596 32.6% 6.5% -31.9% -6.3% 2.5% 2.4% 1.7% 1.4%
Customs Duty 2254 2450 1352 1125 7.1% 8.7% -44.8% -16.8% 1.5% 1.5% 0.8% 0.6%
Service Tax 2545 2750 795 0 20.4% 8.1% -71.1% -100.0% 1.7% 1.6% 0.5% 0.0%
Source: Budget Document, PhillipCapital India Research
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UNION BUDGET 2018-19 POST BUDGET REVIEW
Non-tax and capital receipts break-up Rs Bn FY16 FY17 FY18BE FY18RE FY19BE
Disinvestment 421 400 465 1000 800
Strategic 0 55 260 - -
Telecom 565 787 443 307 487
Dividends 1121 1230 1424 1064 1073
Public Enterprises 306 519 675 548 525
RBI 815 712 749 516 548
Source: Budget Document, PhillipCapital India Research
Central government’s capital expenditure (Rs bn)
FY17 FY18BE FY18RE FY19BE
Gross Budgetary Support 2846 3098 2734 3004
Ministry of Railways (IEBR) 647 760 800 934
IEBR (excluding Ministry of Railways) 2734 3090 3969 3848
Total 6227 6948 7503 7787
Source: Budget Document, PhillipCapital India Research
Central government fiscal deficit Revenue and capital expenditure (% of GDP)
Gross and Net market borrowing (Rs bn) Direct and indirect tax (% of GDP)
3.0
3.2
3.4
3.6
3.8
4.0
4800
5000
5200
5400
5600
5800
6000
6200
6400
FY16 FY17 FY18BE FY18RE FY19BE
Fiscal deficit (Rs Bn) Fiscal deficit (% of GDP) (RHS)
1.4
1.5
1.6
1.7
1.8
1.9
10.4
10.6
10.8
11.0
11.2
11.4
11.6
11.8
FY16 FY17 FY18BE FY18RE FY19BE
Revenue Exp (% of GDP) Capital Exp (% of GDP) (RHS)
0
1000
2000
3000
4000
5000
6000
7000
FY9
7
FY9
8
FY9
9
FY0
0
FY0
1
FY0
2
FY0
3
FY0
4
FY0
5
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8B
E FY
18
RE
FY1
9B
E
Gross borrowing Net borrowing
3%
4%
4%
5%
5%
6%
6%
7%
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8B
E
FY1
8R
E
FY1
9B
E
Direct Tax Indirect tax
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UNION BUDGET 2018-19 POST BUDGET REVIEW
Gross tax revenue
Source: Budget Document, PhillipCapital India Research
Outlay on major schemes
FY16 FY17 FY18BE FY18RE FY19BE
National Social Assistance prog 8616 8854 9500 8745 9975
MNREGA 37341 48215 48000 55000 55000
Green Revolution 9777 10105 13741 11185 13909
Pradhan Mantri Krishi Sinchai Yojana 7781 5134 7377 7392 9429
Pradhan Mantri Gram Sadak Yojna 18290 17923 19000 16900 19000
Pradhan Mantri Awas Yojna 11603 20952 29043 29043 27505
PMAY: Rural 10116 16000 23000 23000 21000
PMAY: Urban 1487 4880 6043 6043 6505
National Rural Drinking Water Mission 4370 5980 6050 7050 7000
Swachh Bharat Mission (SBM) 7469 12619 16248 19248 17843
SBM: Rural 6703 10484 13948 16948 15343
SBM: Urban 766 2135 2300 2300 2500
National Health Mission (NHM) 20213 22870 27131 31292 30634
National Rural Health Mission 18254 19826 21189 25459 24280
National Urban Health Mission 717 491 752 652 875
National Education Mission 27066 27616 29556 29556 32613
National Programme of Mid day meal 9145 9475 10000 10000 10500
Development Services 16835 15893 20755 19963 23088
National Livelihood Mission-Ajeevika 2783 3486 4849 4699 6060
National Rural Livelihood Mission 2514 3158 4500 4350 5750
National Urban Livelihood Mission 269 329 349 349 310
Jobs and Skill Development 1177 1817 4089 2905 5071
Urban Rejuvenation Mission : AMRUT 7296 9277 9000 8999 12169
Modernisation of Police Forces 1581 2230 2022 2577 3157
Bharatnet ... 5600 10000 5710 8175
MRTS and Metro Projects 9300 15327 18000 18000 15000
Interest subsidy for credit to farmers 13000 13397 15000 14750 15000
Namami Gange-National Ganga Plan 1000 1675 2300 2300 2300
LPG connection to poor households ... 2500 2500 2252 3200
National SocialAssistance Progamme 8616 8854 9500 8745 9975
Crop Insurance Scheme 2983 11052 9000 10698 13000
Interest Equalisation Scheme 1100 1000 1100 2000 2500
India Post Payments Bank ... 300 500 500 300
Price Stabilisation Fund ... 6900 3500 3500 1500
Recapitalization of PSBs 25000 24997 10000 10000 0
Police Infrastructure 3739 2904 4447 4490 4750
Credit Support Programme 71 716 3002 2802 700
Prime Minister Employment Gen Prog (PMEGP) 1281 1113 1024 1195 1801
Gram Jyoti Yojna 4500 2966 4814 5400 3800
Integrated Power Dev Scheme 1002 4366 5821 4372 4935
Construction of New Lines 15828 14193 11533 7768 9755
Source: Budget Document, PhillipCapital India Research
-5%
0%
5%
10%
15%
20%
25%
30%
0
5000
10000
15000
20000
25000
FY0
0
FY0
1
FY0
2
FY0
3
FY0
4
FY0
5
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8B
E
FY1
8R
E
FY1
9B
E
Gross Tax Revenue (Rs Bn, LHS) YoY growth (%, RHS)
% of GDP
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UNION BUDGET 2018-19 POST BUDGET REVIEW
GoI expenditure break-up
______________Rs Bn_______________ __________YoY Growth__________ _____% of total expenditure________
FY17 FY18BE FY18RE FY19BE FY18BE/17 FY18RE/17 FY19BE/18RE FY17 FY18BE FY18RE FY19BE
Pension 1314 1312 1474 1685 -0.2 12.2 14.3 6.7 6.1 6.6 6.9
Defence 2518 2624 2671 2827 4.2 6.1 5.8 12.7 12.2 12.0 11.6
Subsidy 2348 2729 2641 2928 16.2 12.5 10.9 11.9 12.7 11.9 12.0
Fertiliser 663 700 650 701 5.6 -2.0 7.9 3.4 3.3 2.9 2.9
Food 1102 1453 1403 1693 31.9 27.3 20.7 5.6 6.8 6.3 6.9
Petroleum 275 250 245 249 -9.2 -11.2 1.9 1.4 1.2 1.1 1.0
Agriculture and Allied Activities 502 570 566 638 13.6 12.8 12.8 2.5 2.7 2.6 2.6
Commerce and Industry 214 247 263 280 15.4 23.2 6.3 1.1 1.1 1.2 1.1
Development of North East 25 27 27 30 7.5 7.5 11.9 0.1 0.1 0.1 0.1
Education 720 797 819 850 10.7 13.7 3.8 3.6 3.7 3.7 3.5
Energy 310 367 417 411 18.6 34.6 -1.4 1.6 1.7 1.9 1.7
External Affairs 128 148 137 150 16.0 7.3 9.7 0.6 0.7 0.6 0.6
Finance 415 295 294 203 -28.9 -29.1 -30.9 2.1 1.4 1.3 0.8
Health 390 489 532 547 25.3 36.4 2.8 2.0 2.3 2.4 2.2
Home Affairs 784 838 881 935 7.0 12.5 6.0 4.0 3.9 4.0 3.8
Interest 4807 5231 5308 5758 8.8 10.4 8.5 24.3 24.4 23.9 23.6
IT and Telecom 180 208 178 224 15.6 -1.0 25.7 0.9 1.0 0.8 0.9
Others 637 677 695 728 6.4 9.2 4.8 3.2 3.2 3.1 3.0
Planning and Statistics 45 50 51 52 12.3 12.7 2.7 0.2 0.2 0.2 0.2
Rural Development 1139 1286 1356 1381 12.9 19.1 1.8 5.8 6.0 6.1 5.7
Scientific Departments 195 223 224 249 14.4 14.8 11.3 1.0 1.0 1.0 1.0
Social Welfare 318 394 386 442 23.8 21.4 14.5 1.6 1.8 1.7 1.8
Tax Administration 221 127 777 1055 -42.7 251.1 35.7 1.1 0.6 3.5 4.3
Transfer to States 1327 1371 1203 1429 3.3 -9.4 18.8 6.7 6.4 5.4 5.8
Transport 1022 1244 1071 1346 21.7 4.8 25.7 5.2 5.8 4.8 5.5
Union Territories 133 134 142 141 0.7 7.5 -0.9 0.7 0.6 0.6 0.6
Urban Development 369 406 408 418 9.9 10.3 2.5 1.9 1.9 1.8 1.7
Grand Total 19752 21467 22178 24422 8.7 12.3 10.1 100.0 100.0 100.0 100.0
Source: Budget Document, PhillipCapital India Research
GoI expenditure break-up
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UNION BUDGET 2018-19 POST BUDGET REVIEW
Agri & Inputs – Positive
WINNERS: Input players in seeds, feeds, crop protection, and enhancements. UPL, PI Industries, Kaveri Seeds, Avanti Feeds, Dhanuka Agritech LOSERS: None Budget 2018-19 had a higher focus on rural income and credit flow to agriculture – with significant increase in agri credit, crop insurance, promotion of food processing infrastructure, agro exports, irrigation and credit facilities to related sectors such as animal husbandry, fisheries and aquaculture. Higher credit allocation and outflow would lead to de-risking/de-burdening of farmers, enabling them to invest more on crop yield improvements and food security through modernised products (crop protection and enhancement products, and hybrid/modified seeds). Review of FM announcement on kharif-crop MSP increment to 1.5x In the Budget 2018-19, the highlight for the agri sector was the hike in the Minimum Support Price (MSP) of kharif crops up to 1.5x of the cost of produce. From the clarification from the Ministry of Agriculture, MSP estimate for 2018-19 of 1.5x cost is based on the A2+FL formula (Actual paid-out cost + imputed value of family labour). In FY17-18, the MSP of kharif crops already stand at 1.3x of A2+FL. This indicates that the average incremental income for a kharif farmer will be 15-18% from current levels.
Budget Proposals PhillipCapital Perspective
No change announced in total fertiliser subsidy (Rs 700bn).
Minimum Support Prices (MSP) for Kharif crops to be hiked to 50% more than A2+FL costs, which is currently at ~33% more, which benefits the farmers by ~15-18% improvement in average incremental income.
Agri-credit target hiked to Rs 11tn from Rs 10tn last year
Budgetary allocation for higher MSP on kharif crops (similar to rabi crops, provided earlier) will trickle down profits to medium and small-scale farmers. This would promote higher spends on hybrid/modified seeds, fertilisers, crop protection products (for pre- and post-harvest use), and equipment. Strong positive for Crop protection and enhancement products and farm-equipment companies
Pradhan Mantri Fasal Bima Yojana: Allocation of Rs 130bn, up 44% from budgeted Rs 90bn in FY18. The coverage of scheme will be increased to 50%/60% of cropped area in FY19/20 from 40% in FY18
Should increase the risk-taking appetite of farmers and lead to more spending on crop protection, soil nutrition, and targeted bio agri-input products and farm equipments
Allocation of Rs 14bn to food processing to promote establishment of specialized agro-processing financial institutions in the sector
Help promote investments in infrastructure and expansion of the current food processing facilities in the country
Government to add advanced food-processing facilities in 42 mega food parks in the country. To develop 22,000 gramin agri markets. Agri market infra fund with a corpus of Rs 20bn
Will support better price realisation of food produce for farmers and FPOs and enable exports of more categories of products
Irrigation: Allocation to the Pradhan Mantri Krishi Sinchai Yojana (PMKSY) aggregated across three ministries increased by ~28% to Rs 94.3bn
More sustainable income with reduced dependence on rains
The coverage of National Agricultural Market (e-NAM) will be expanded to 585 APMCs from the current 470. E-NAMs will be de-linked from APMC regulations.
For the post-harvest phase, the government has taken steps to enable farmers to get better prices for their produce in the markets through a transparent agri-trading online platform.
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UNION BUDGET 2018-19 POST BUDGET REVIEW
With e-NAM, small farmers, who could not afford to trade in large markets like APMCs, would have more benefits.
Proposed new scheme 'Operation Green', which shall promote Farmer Producers Orgs (FPO), agri logistics, processing facilities, and professional management. Allocated a corpus of Rs 50bn
Kisan Credit Cards scheme to support short-term credit support for animal husbandry, fisheries, and aquaculture sectors. Allocated Rs 100bn on two new funds – Dairy Processing Infrastructure Development Fund (DPIDF) and Fisheries & Aquaculture Infrastructure Development Fund (FAIDF)
Positive for feeds, dairy/dairy products, fish/seafood exports, processing centers and aquaculture industries
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UNION BUDGET 2018-19 POST BUDGET REVIEW
Automobiles – Marginal positive
WINNERS: Apollo Tyres, Ceat, MRF (NR), JK Tyres (NR), Escorts, Hero Motocorp, M&M LOSERS: None
Budget Proposals PhillipCapital Perspective
Basic custom duty on tyre imports hiked to 15% from 10% earlier
Positive for tyre companies. More so for JKTY and
Apollo, who have higher exposure to the MHCV segment.
Our checks revealed that the lowest-quality Chinese tyre prices have already surged to Rs 30,000/pair – with this move, these will inch up to Rs 31,500/pair (vs. Rs 23,000/pair six months ago).
As we have been saying – we see a structural drop in imports of Chinese tyres, thereby increasing pricing power of domestic players.
Boost to the rural sector Positive for Escorts, MSIL, Hero Motocorp and M&M.
Escorts has ~80% revenue exposure to rural markets, M&M and Hero Moto both have c.50%.
Maruti generates ~35% of its revenues from the rural segment.
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UNION BUDGET 2018-19 POST BUDGET REVIEW
BFSI Banks and HFCs: Mildly positive; NBFCs: Positive
WINNERS: ICICI Bank, Axis Bank, CIFC, MMFS, SCUF, SHTF LOSERS: None This budget is mildly positive for the BFSI sector
Budget Proposals PhillipCapital Perspective
BANK and HFC
Deeping of the bond market – large corporates to meet about a fourth of their financing needs from this market
Necessary action to be taken to allow companies rated below AA to raise funding from the bond market
Disintermediation is negative for the banking sector. Though banks will be eventual participants in the bond market, it is negative from the margin perspective
Negative for banks with a low CASA base
Carry forward and set-off of losses in certain companies U/S 79 of IT Act
For companies under IBC, the aggregate amount of unabsorbed depreciation and brought-forward loss to be reduced from the book profit for MAT calculation
Restriction on shareholding for the purpose of carry forward loss shall not apply in case of change of shareholding pursuant to an approved resolution plan under IBC, 2016.
Clears the ambiguity about the applicability of the rule for both listed and unlisted companies.
Positive for banks as the carry forward benefit for the acquiring company will help in better price discovery for the stressed asset.
Positive for banks (SBI, ICICI, Axis, PNB)
Increased allocation under MUDRA loans to Rs 3tn Positive for micro credit and micro finance due to increased allocation. +BHARATFIN, UJJIVAN, EQUITAS
Corporate income tax for MSMEs up to Rs 2.5mn turnover has been reduced to 25% from 30%
Positive for MSMEs as the segment has been under pressure after demonetisation. This will improve cash flow and help the segment to overcome GST implementation challenges. +DCBB, Federal Bank, CUB, KVB
Housing sector
Establish affordable housing fund (AHF) in NHB, funded from priority sector shortfall of banks
Allocation under PMAY is Rs 275bn in FY19 (Rs 290bn in FY18). Credit-linked subsidy scheme (CLSS) Rs 19bn (Rs 14bn in FY18)
Increased refinancing corpus will be available for affordable housing. As per NHB data, ~50% of refinance in FY16 was for houses with ticket sizes of +Rs 2.5mn.
Though the allocation under CLSS has increased yoy, we believe it is still much lower than what is actually required to fulfill the Housing 2022 scheme.
Mildly positive for HFCs (Repco, Gruh, CanFin Homes)
Thrust towards agri-business
MSP for kharif crop will also be 1.5x of production cost – in line with rabi crop.
Will help increase agriculture credit for the system, but it also increases the credit risk if adequate underwriting measures are not taken,
Page | 12 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Formalise mechanism to ensure that the agri produce will not be procured at less than MSP
Extend facility of Kisan Credit Card to fisheries and animal husbandry
Agriculture credit target for FY19 is Rs 11tn
Evolve a suitable mechanism to enable access of crop loans to lessee cultivators.
given the inherent nature of risk involved
Exemption of interest income for senior citizens on deposits with banks and post offices to be increased to Rs 50,000 from Rs 10,000.
Positive for banks as it would attract retail deposits from senior citizens
It is proposed that trading in agricultural commodity derivatives on a recognized stock exchange shall not be treated as a speculative transaction even if no Commodities Transaction Tax (CTT) has been paid for those derivative transactions.
Rationalization of CTT for options on commodity derivatives.
For traders in the commodity derivative segment, any losses arising from such transactions can be set off against income from any other source. May lead to some increase in volume in agri- commodity derivates
Rationalizations of CTT on the commodity option will not necessarily improve its volume
Neutral for MCX
NBFC
In FY19, for creation of livelihood and infrastructure in rural areas, total amount to be spent by the ministries will be Rs 14.34tn
Increased spend in rural regions to improve cash flow in rural geographies. Positive for MMFS, as 80% of its branches are concentrated in rural areas
Target of Rs 3tn for lending under MUDRA for 2018-19
Refinancing policy and eligibility criteria set by MUDRA will be reviewed for better refinancing of NBFCs
Positive for NBFCs as Mudra provides refinance at much cheaper rates
Increased investments in the road sector Increased connectivity drives demand for more vehicles such as cars and trucks. Hence, positive for vehicle financiers – SHTF, CIFC, MMFS
Page | 13 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Capital Goods & Power – Neutral
WINNERS: L&T, KEC International, Engineers India LOSERS: NA
Budget Proposals PhillipCapital Perspective
Estimated spending by central PSUs projected to grow by 5% to Rs 5.1tn
Capex growth in railways (+22% yoy), roads (+10%), telecom (+39%), and oil & gas (+2% yoy) will offset a decline in power capex (-16%)
Railway capex to grow 22% yoy to Rs 1.47tn
Funding the capex will not be a challenge
Capex to be driven by network expansion (new lines and gauge conversion), track renewals, rolling stocks, and electrification. Investments in network decongestion projects and signalling and telecom will be muted
Budgetary support is expected to increase by 33% yoy to Rs 531bn while other financing should grow 17% yoy
Capital outlay for defence (ex-construction and land) to grow modestly by 9% to Rs 830bn on a low base
Defence outlay still out of sync with project approvals accorded by the government (Rs 4.2tn).
Beneficiaries: BEL, L&T, Tata Power, Astra Microwave
Allocation to irrigation-led schemes raised by 28% yoy to Rs 94bn
Higher capex under PMKSY and drip irrigation is positive for pump companies.
Beneficiaries: Kirloskar Brothers, Crompton Greaves, Shakti Pumps, V-Guard, KSB
Allocation to rural and urban electrification schemes – DDUGJY, IPDS and Saubhagya (rural) - flat yoy
Beneficiaries: KEC International, L&T, Voltas, ABB, Schneider Electric
Allocation to Namami Ganga at Rs 23bn (flat yoy) The government has started awarding projects under the Hybrid Annuity Model in FY18.
Beneficiaries: Va Tech Wabag, L&T, ION Exchange, SPML, Ramky Infra
AMRUT allocation increased by 20% yoy to Rs 60bn (8% of the project costs approved)
Expect strong momentum to continue where Rs 319bn of (Rs 776bn approved) water supply and sewerage projects have been awarded.
Beneficiaries: L&T, Va Tech Wabag, ION Exchange, SPML, Ramky Infra
Smart Cities allocation raised by 54% yoy to Rs 62bn Positive for L&T, Siemens, ABB, VA Tech Wabag
Page | 14 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Cement – Positive
WINNERS: All: Especially – pan-India majors UltraTech, ACC, and Ambuja and regional leaders such as Dalmia Bharat, JK Cement, India Cements, and JK Lakshmi Cement. LOSERS: None The budget continued its focus on development such as housing for all and better infrastructure across all formats. Additional demand momentum should come from improved focus on providing hygiene facilities, setting up more educational institutions, and Smart Cities. This budget has specifically focused on improving earnings of rural India through a host of measures. In India, a major chunk of cement demand is from housing and that too from Individual House Builders (IHB) in rural India. This budget will help revive IHB demand, which is a key trigger to improve cement companies’ earnings profile.
Budget proposals PhillipCapital Perspective
Improving the income profile of rural India IHB remains a major chunk of cement demand. In a populous budget, the FM announced a series of measures that would improve rural incomes, which would ultimately lead to a revival of cement demand from the IHB segment (key for demand revival)
Infrastructure demand, though helpful, is more useful for better scale efficiencies. The key earnings trigger will come from a revival of IHB demand – this is where cement manufacturers display their pricing power and earn better margins
20mn toilets by the end of FY19 Implies cement demand of ~4-5mn tonnes in FY19, assuming minimum size of 10 sq. ft. per toilet
Reiteration of focus on housing for all by 2022 – 5.1 mn houses in rural areas in FY19 and assistance sanctioned to construct 3.7mn houses in urban areas over FY17-19
Implies cement demand of 20-25mn tonnes for rural India in FY19 and 15-18mn tonnes over FY17-19 for urban India, assuming minimum house size of 200 sq. ft.
Setting up of a dedicated Affordable Housing Fund in the National Housing Bank
This will facilitate smoother construction of affordable houses
Reemphasized focus on development of infrastructure facilities across all formats – roads, rails, metros, ports, airport, inland water ways, defense infrastructure, tourism infrastructure, smart cities etc.
Better cement demand from infrastructure projects, meaning better scale efficiencies and volume ramp up for cement manufacturers
Incentive for real estate transaction The FM has proposed that no adjustments shall be made in computing gains from real estate transaction where the circle rate value does not exceed 5% of the consideration. Though this will not create any immediate direct momentum for cement demand, in the long run, it will facilitate transactions in the real estate space, and help developers / investors to get rid of the existing inventories faster and bring in more transparency
Page | 15 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
FMCG – Positive
WINNERS: ITC, Colgate, HUL, Emami, and Dabur
Budget Proposals PhillipCapital Perspective
No increase in GST compensation cess on cigarettes Positive for ITC; however, the government always has the option to increase cess outside the ambit of the budget
We believe there is less likelihood of any increase in compensation cess in FY19 as the government shall be in comfortable position to collect budgeted Rs 900bn (because the monthly run-rate from July to November 2017 was >Rs 75bn
Higher MSP price for kharif crops, creation of fund for aquaculture and fisheries, and setting up more toilets under the Swacch Bharat mission
Positive for rural-oriented companies such as HUL, Colgate, Dabur, and Emami
Page | 16 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Healthcare– Positive (non-event for pharmaceuticals)
WINNERS: Apollo Hospital, Healthcare Global, Thyrocare, Dr Lal PathLabs LOSERS: None
Budget Proposals PhillipCapital Perspective
Budget allocation raised by 13% to Rs 306bn towards the National Health Mission scheme (covering government insurance and medi-claims).
Indirect positive for the Indian healthcare sector (more for corporate hospitals than pharmaceuticals).
Budget allocation for biotechnology research raised by 8% to Rs 13.5bn.
Positive for companies having presence in biotechnology space like Biocon.
Under ‘‘Ayushman Bharat’’ program – to set up 150,000 ‘Health and Wellness Centers’. These centers will also provide free essential drugs and diagnostic services. Budget allocation of Rs 12bn.
This could be a very small negative for Indian pharma (as it could lead to price challenges), but positive for diagnostic players.
Launching flagship National Health Protection Scheme to cover over 100mn poor and vulnerable families (with about five family members) providing coverage up to Rs 500,000 per-family per-year for secondary and tertiary care hospitalization.
Inclusion of tertiary care hospitalisation will be positive for private hospital and diagnosis companies, as government hospital lacks facilities for treating critical/complex disease.
Our rough calculation suggests that this initiative could result in an incremental business opportunity of ~US$ 1.5bn (i.e., about 2% of Indian healthcare market).
The tariff rate of customs duty for specified medical devices increased to 10% from 7.5%. The effective rate of import duty on such medical devices, will, however, remain unchanged.
Almost neutral for medical device manufacturing companies.
Page | 17 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Infrastructure – Positive
WINNERS: NCC, Ashoka Buildcon, Ahluwalia Contracts, Sadbhav Engineering, PNC Infratech, KNR Construction, HCC, Adani Ports LOSERS: JKumar Infraprojects (Minor)
Budget Proposals PhillipCapital Perspective
Increased allocation for roads and railways
16% increase in budgetary allocation for roads
32% increase for railways
The increase in allocation was along expected lines
Positive for road companies – Ashoka Buildcon, Sadbhav Engineering, and EPC companies – NCC, PNC, KNR, HCC
Positive for companies in MRTS segment – J Kumar, ITD Cementation, HCC
Increased allocation for shipping and aviation
20% increase in budgetary allocation for ports segment
25% increase in allocation for Sagar Mala
Positive for Adani Ports & SEZ
Positive for ITD Cementation
Lower allocation for metro projects
17% decrease in budgetary allocation for metro projects Negative for JKumar Infraprojects
Huge jump in allocation for Smart Cities and AMRUT
54% decrease in budgetary allocation for Smart Cities
20% increase in allocation for AMRUT
Positive for NCC, Ahluwalia Contracts
Total Budgetary allocation Rs bn FY16 FY17 FY18 FY18RE FY19 Increment % Increase
Budget Support
Roads 469.1 522.3 649.0 610.0 710.0 100.0 16%
NHAI 230.2 149.8 238.9 238.9 296.6 57.7 24%
Urban development* 184.2 320.7 345.8 347.1 352.6 5.5 2%
Smart cities etc 14.8 44.1 40.0 40.0 61.7 21.7 54%
AMRUT 27.0 48.8 50.0 50.0 60.0 10.0 20%
Metro projects 93.0 157.0 180.0 180.0 150.0 -30.0 -17%
Railways 350.1 452.3 550.0 418.1 550.9 132.7 32%
Shipping 13.2 13.3 17.7 15.7 18.8 3.1 20%
Sagar mala, ports 1.4 4.1 6.0 4.8 6.0 1.2 25%
Inland transport 3.4 3.7 3.5 4.8 5.1 0.3 6%
Power 77.3 104.8 138.8 149.2 150.5 1.3 1%
Aviation 41.7 34.1 27.0 27.1 66.0 38.9 144%
PMGSY 182.9 179.2 190.0 169.0 190.0 21.0 12%
PMAY 101.2 209.5 290.4 290.4 275.1 -15.4 -5%
Urban
48.8 60.4 60.4 65.1 4.6 8%
Rural
160.7 230.0 230.0 210.0 -20.0 -9%
Swachh Bharat
126.2 162.5 192.5 178.4 -14.1 -7%
Urban
21.4 23.0 23.0 25.0 2.0 9%
Rural
104.8 139.5 169.5 153.4 -16.1 -9%
Page | 18 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Midcap – Positive
WINNERS: Sintex Plastics, Pennar Engineered Building Systems (PEBS), Sical, Praj, Bajaj Electricals, KEI Industries, Finolex Cables, Havells, V-Guard Industries, Sterlite Technologies, Somany ceramics, Kajaria, AGL, Orient Bell. LOSERS: KDDL
Budget Proposals PhillipCapital Perspective
Allocation of Ministry of Food Processing doubled to Rs 14bn from Rs 7.15bn.
Rashtriya Krishi Vikas Yojana (RKVY) for 1.05mn cold-storage, godowns, and glass houses – with an allocation of Rs 31bn. Scheme for cold-chain with 101 projects; 12 mega food parks.
Solar rooftops in Smart Cities.
150,000 health and wellness centers to be set up with an allocation of Rs 12bn.
Airport development under UDAN.
Investment in cold-chain and warehouses is positive for prefab and sandwich-panel companies such as PEBS and Sintex, and reefer-transport companies like Sical and Snowman.
Sagar Mala budgetary allocation at Rs 2.5bn from Rs 1.25bn; major ports allocation Rs 40.4bn from Rs 31.6bn. Total financial outlay on Sagar Mala at Rs 6bn for modernisation and connectivity.
Dredging at VOC Port / KOPT at Rs 677mn / Rs 1.5bn. Farakka barge Rs 1.95bn.
Investment in Sagarmala will promote rail and coastal cargo movement in the long term.
The investment in inland waterways and dredging is positive for DCI and Mercator.
A comprehensive textile sector package of Rs 71.5bn to boost the apparel and made-up segments.
Remission of state levies of Rs 16.6bn.
Amended technology upgradation fund of Rs 23bn.
Technology upgradation leading to higher productivity.
To create export incentives. Positive for textile exporters- KPR, SP Apparel, Kitex.
Railways’ capex for the year 2018-19 pegged at Rs 1.48tn; large part devoted to capacity creation.
Work on Eastern and Western Dedicated Freight Corridors is in full swing. Adequate number of rolling stock (12,000 wagons, 5,160 coaches, 700 locomotives) to be procured in 2018-19.
Redevelopment of 600 major railway stations is being taken up by Indian Railway.
Investment in wagon and coaches is positive for Pennar Industries.
Levy of Road and Infrastructure Cess on petrol and high-speed diesel oil of Rs 8 per ltr in place of abolition of additional excise duty of Rs 6 per ltr and reduction of basic excise duty by Rs 2 per ltr.
No infrastructure cess on ethanol blending up to 10% and bio diesel up to 20%
Duty benefit on ethanol and bio-diesel will incentivise oil marketing companies for ethanol blending.
Positive for sugar companies and Praj.
Custom duty on smart watches / wrist watches wearable devices increased to 20% from 10%.
Levy of social welfare surcharge on imported goods at 10% (from nil earlier) of the aggregate duties of customs.
Negative for watch retailers who are focused on imported brands.
Negative for KDDL.
Tempo of rural electrification maintained
Allocation for Saubhagya (rural electrification) increased by 77% to Rs 27bn (total allocation of Rs 160bn – electrification of 40 mn houses).
This allocation is in line with the government’s capex and timetable. Ripple effect of electrification is already visible in the steady consumption of wires, cables, switches, lighting, fans, and appliances.
Page | 19 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Allocation to Deendayal Upadhyay Gram Jyoti Yojana (DDUGJY) stood at Rs 38bn.
Under DDUGJY electrification of 100,000 villages; under Saubhagya 17.5mn households.
Electrical companies with comprehensive portfolios that include wires and cables and lighting stand to benefit the most – KEI Industries, Finolex Cables, Havells, V-Guard, Orient Electric, and Surya Roshni.
Telecom Infrastructure
Setup 500,000 wi-fi hotspots will provide broadband access to 50mn rural citizens.
Allocation to Bharatnet has increased by 43% to Rs 100bn.
Allocation of optical-fibre-cable-based network for Defence Services increased by 20% to Rs 45bn.
Will create demand for optical fiber cables. Sterlite technologies, Finolex Cables will be biggest beneficiaries.
Focus on Swachh Bharat Abhiyan, affordable housing, Smart Cities, and other rural development schemes
Increased allocation in Swachh Bharat Mission (SBM) by 10% to Rs 178bn and in the Urban Rejuvenation Mission (Smart Cities + AMRUT) by 35% to Rs 122bn. To build 20mn toilets by 2019 under SBM. To build 4.9mn houses under Pradhan Mantri Awaas Yojana – Gramin.
It will create demand for toilets, modern sewage systems (bath fitting), tiles, and other building-material products. Positive for the Indian ceramic industry; positive for Kajaria, Somany, AGL, Orient Bell, Nictco, Cera, and HSIL.
Focus on Make in India: Custom duty increased on:
Cellular Mobile Phone To 20% from 15%
Parts and accessories of mobile phones To 15% from 7.5%/10%
Charger/adapter To 10% from zero
LCD panels and other parts of LED TVs To 15% from 7.5%/10%
Parts for manufacture of LCD/LED TV panels To 10% from zero
Silica used for manufacture of optical fiber
cables
To 5% from zero
Furniture: Seats, mattresses supports, and
lamps and lighting fittings
To 20% from 10%
Positive for Dixon, PG Electroplast, Sterlite Technology, Finolex Cables, Uniply.
Page | 20 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.
Rating Criteria Definition
BUY >= +15% Target price is equal to or more than 15% of current market price
NEUTRAL -15% > to < +15% Target price is less than +15% but more than -15%
SELL <= -15% Target price is less than or equal to -15%.
Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919
Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101
Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735
Research
Automobiles
Engineering, Capital Goods
Pharma & Specialty Chem
Dhawal Doshi (9122) 6246 4128
Jonas Bhutta (9122) 6246 4119
Surya Patra (9122) 6246 4121
Nitesh Sharma, CFA (9122) 6246 4126
Vikram Rawat (9122) 6246 4120
Mehul Sheth (9122) 6246 4123
Agro Chemicals
IT Services & Infrastructure
Raag Haria (9122) 6667 9943
Varun Vijayan (9122) 6246 4117
Vibhor Singhal (9122) 6246 4109
Strategy
Banking, NBFCs
Shyamal Dhruve (9122) 6246 4110
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Manish Agarwalla (9122) 6246 4125
Logistics, Transportation & Midcap
Neeraj Chadawar (9122) 6246 4116
Pradeep Agrawal (9122) 6246 4113
Vikram Suryavanshi (9122) 6246 4111
Telecom
Paresh Jain (9122) 6246 4114
Media
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Consumer & Retail
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Technicals
Naveen Kulkarni, CFA, FRM (9122) 6246 4122
Vishal Gutka (9122) 6246 4118
Subodh Gupta, CMT (9122) 6246 4136
Preeyam Tolia (9122) 6246 4129
Metals
Production Manager
Vishal Gutka (9122) 6246 4118
Dhawal Doshi (9122) 6246 4128
Ganesh Deorukhkar (9122) 6667 9966
Akshay Mokashe (9122) 6246 4130
Vipul Agrawal (9122) 6246 4127
Editor
Cement
Mid-Caps
Roshan Sony 98199 72726
Vaibhav Agarwal (9122) 6246 4124
Deepak Agarwal (9122) 6246 4112
Sr. Manager – Equities Support
Economics
Rosie Ferns (9122) 6667 9971
Anjali Verma (9122) 6246 4115
Sales & Distribution
Corporate Communications
Ashvin Patil (9122) 6246 4105
Asia Sales
Zarine Damania (9122) 6667 9976
Kishor Binwal (9122) 6246 4106
Dhawal Shah 8522 277 6747
Bhavin Shah (9122) 6246 4102
Sales Trader
Ashka Mehta Gulati (9122) 6246 4108
Dilesh Doshi (9122) 6667 9747
Execution
Archan Vyas (9122) 6246 4107
Suniil Pandit (9122) 6667 9745
Mayur Shah (9122) 6667 9945
Contact Information (Regional Member Companies)
SINGAPORE: Phillip Securities Pte Ltd
250 North Bridge Road, #06-00 RafflesCityTower,
Singapore 179101
Tel : (65) 6533 6001 Fax: (65) 6535 3834
www.phillip.com.sg
MALAYSIA: Phillip Capital Management Sdn Bhd
B-3-6 Block B Level 3, Megan Avenue II,
No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur
Tel (60) 3 2162 8841 Fax (60) 3 2166 5099
www.poems.com.my
HONG KONG: Phillip Securities (HK) Ltd
11/F United Centre 95 Queensway Hong Kong
Tel (852) 2277 6600 Fax: (852) 2868 5307
www.phillip.com.hk
JAPAN: Phillip Securities Japan, Ltd
4-2 Nihonbashi Kabutocho, Chuo-ku
Tokyo 103-0026
Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141
www.phillip.co.jp
INDONESIA: PT Phillip Securities Indonesia
ANZTower Level 23B, Jl Jend Sudirman Kav 33A,
Jakarta 10220, Indonesia
Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809
www.phillip.co.id
CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd.
No 550 Yan An East Road, OceanTower Unit 2318
Shanghai 200 001
Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940
www.phillip.com.cn
THAILAND: Phillip Securities (Thailand) Public Co. Ltd.
15th Floor, VorawatBuilding, 849 Silom Road,
Silom, Bangrak, Bangkok 10500 Thailand
Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921
www.phillip.co.th
FRANCE: King & Shaxson Capital Ltd.
3rd Floor, 35 Rue de la Bienfaisance
75008 Paris France
Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017
www.kingandshaxson.com
UNITED KINGDOM: King & Shaxson Ltd.
6th Floor, Candlewick House, 120 Cannon Street
London, EC4N 6AS
Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835
www.kingandshaxson.com
UNITED STATES: Phillip Futures Inc.
141 W Jackson Blvd Ste 3050
The Chicago Board of TradeBuilding
Chicago, IL 60604 USA
Tel (1) 312 356 9000 Fax: (1) 312 356 9005
AUSTRALIA: PhillipCapital Australia
Level 10, 330 Collins Street
Melbourne, VIC 3000, Australia
Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899
www.phillipcapital.com.au
SRI LANKA: Asha Phillip Securities Limited
Level 4, Millennium House, 46/58 Navam Mawatha,
Colombo 2, Sri Lanka
Tel: (94) 11 2429 100 Fax: (94) 11 2429 199
www.ashaphillip.net/home.htm
INDIA
PhillipCapital (India) Private Limited
No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2483 1919 Fax: (9122) 6667 9955 www.phillipcapital.in
Page | 21 | PHILLIPCAPITAL INDIA RESEARCH
UNION BUDGET 2018-19 POST BUDGET REVIEW
Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.
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This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.
Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.
Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.
Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in
this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the
company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this
research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for
any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co-managed in the previous twelve months, a private or public offering of securities for
the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in
connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:
Sr. no. Particulars Yes/No
1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL
No
2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the company(ies) covered in the Research report
No
3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No
4 PCIL or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the company(ies) covered in the Research report
No
5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months
No
Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.
Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.
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UNION BUDGET 2018-19 POST BUDGET REVIEW
Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.
Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.
Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.
Kindly note that past performance is not necessarily a guide to future performance.
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For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.-regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.
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