union budget review 2014 - 2015 getting the right...

20
Union Budget Review 2014 - 2015 Union Budget Review 2014 - 2015 Union Budget Review 2014 - 2015 Getting the ‘big idea’ right…execution to follow Getting the ‘big idea’ right…execution to follow Getting the ‘big idea’ right…execution to follow

Upload: others

Post on 15-Mar-2020

2 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Union Budget Review2014 - 2015

Union Budget Review2014 - 2015

Union Budget Review2014 - 2015

Getting the ‘big idea’ right…execution to followGetting the ‘big idea’ right…execution to followGetting the ‘big idea’ right…execution to follow

Page 2: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

The NDA led government presented its maiden Budget wherein the

Deal Team – At Your ServiceBudget 2014-15: Getting the ‘big idea’ right…execution to follow

Key measures announced in this Budget:The NDA led government presented its maiden Budget wherein theFinance Minister showed good administrative discipline and reiterated hiscommitment to maintain fiscal deficit at 4.1% for FY15E, contrary tomarket expectations, 3.6% in FY16E and 3% in FY17E. Given limitedoptions on the revenue front, achieving a fiscal deficit target of 4.1% looksdemanding. Overall, the Budget has amply addressed the strategic needto improve the investment climate by emphasising on measures to createa framework for low & stable inflation, setting fiscal deficit on a sustainable

Key measures announced in this Budget:

• On the tax receipt front, the government is targeting 19.8% YoY growth innet tax revenues vs. 21% assumed in vote-on-account and appearsdemanding considering the tax sops in direct and indirect taxes. We havebuilt in 14.2% YoY growth in net tax collection largely in line with nominalGDP growth

a framework for low & stable inflation, setting fiscal deficit on a sustainablepath through tax and expenditure reforms and setting up a broad basedinclusive growth framework for a sustainable market economy

• In our view, the Budget, unarguably the most anticipated in recent times,highlighted the structural reforms, including increase in FDI in defence &insurance, timeline for GST roll out, commitment to no retrospectivetaxation and tax induced benefits to select sectors such as power,

• We believe the government will exceed its disinvestment target of| 63,425 crore given the buoyancy in the capital market. Stake sales invarious PSUs to comply with Sebi guidelines of 75% promoter holdingwould alone fetch a whopping | 80,000 crore to the government, whichcould be a major kicker in revenue growth

• We expect the burden of the Food Security Bill (FSB) to remain lower thanp ,manufacturing and REITs, among others

• The Budget intends to deploy subsidies efficiently along with variousmeasures to improve the rural economy, financial savings of the neo-middle class with an overall improvement of the social fabric of theeconomy. The government emphasised on PPP as the preferred route tomobilise funds for the infrastructure sector and has followed a strategy to

p y ( )budgeted due to the six month delay in rollout of FSB coupled with partialimplementation (currently 25 states & Union territories). In our view, thenew government has also not considered the rollover impact of subsidies.Adjusting for it, we believe subsidies could inch up to | 82,000 crore

• In line with our expectation to focus on growth, the budgetary allocationtowards plan expenditure is likely to grow 26.9% YoY in FY15, which

make the country attractive and facilitate FDI in various sectors

• With limited scope for manoeuvrability, the Finance Minister has managedto rationalise duties to encourage domestic manufacturing. Increasedfocus on road development (8500 km and | 37000 crore allocationtowards NHAI), inducing PSUs to undertake capex of | 247000 crore,ordering for 16 new ports, fresh allocation towards the smart city project,

would be a key kicker for next year’s GDP growth

• We estimate the fiscal deficit will remain at 4.6% vs. the government’s4.1% target primarily due to rollover impact of subsidies and lower taxrevenues

Other key measures:

proposal for establishment of airports in tier I and II cities, etc. wouldprovide the much desired impetus to the capex cycle

• Noticeably, the Budget has paved the way to set the fiscal house in orderand laid out a clear roadmap to revive growth. The Union Budget waspragmatic, had execution at its forefront and focused on improving thestructural agility. It should be taken as a precursor to fleshing out the

i id l f h

• Inducing PSUs to undertake capex of | 2,47,000 crore• Increased focus on roads with proposed investment of | 37,880 crore• Also, | 7060 crore allocated towards developing 100 smart cities• Single window clearances through a 24x7 portal

We are bullish on domestic oriented sectors like automobiles, cement,capital goods, power, infrastructure, metals, oil & gas and banks.Defensive sectors like FMCG pharma and IT could lag broader markets

2

economic ideology of the government Defensive sectors like FMCG, pharma and IT could lag broader markets.We maintain our December 2015 Sensex and Nifty target of 30,300 and9050, respectively

July 11, 2014

Page 3: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceWe anticipate FY15 fiscal deficit at 4.6%...

Particulars FY14P FY15BE YoY (%) FY15IE YoY (%) Comments( ) ( )Revenue ReceiptsNet Tax revenue 816,046 977,258 19.8 931,611 14.2 Considering the tax sops on in direct & indirect taxes, the government target of 19.8% Y-o-Y growth in net tax

revenues appears to be optimistic. We have built up 14.2% Y-o-Y growth in net tax collection largely in line withnominal GDP growth

Non Tax RevenuesDividend 90,437 90,229 (0.2) 90,229 (0.2) Economic services 67,586 79,536 17.7 79,536 17.7 Given the lower likelihood of major auction, the economic service target set by the government looks challenging.

Others 41,209 42,740 3.7 42,740 3.7 Total 1,015,279 1,189,763 17.2 1,144,116 12.7 Capital ReceiptsRecovery of Loans 12,502 10,527 (15.8) 10,527 (15.8) Disinvestments 27,555 63,425 130.2 63,425 130.2 With the stake sale in various PSUs to comply with Sebi guidelines of 75% coupled with buoyancy in capital

market, we believe disinvestment will play a pivotal role in managing the fiscal deficit

T t l 40 057 73 952 84 6 73 952 84 6 Total 40,057 73,952 84.6 73,952 84.6 Total Receipts 1,055,336 1,263,715 19.7 1,218,068 15.4

Non plan ExpenditureSubsidiesFertilizer 67,444 72,970 8.2 72,970 8.2 Food 92,946 115,000 23.7 110,066 18.4 We expect the burden of the Food Security Bill to remain lower than budgeted due to six month delay in rollout of

FSB coupled with partial implementation (currently 25 states & Union territories)P l 85 418 63 426 (25 7) 82 657 (3 2) I i h h l id d h ll i f b idi Adj i f hPetroleum 85,418 63,426 (25.7) 82,657 (3.2) In our view, the new government has also not considered the roll over impact of subsidies. Adjusting for that, we

believe subsidies to remain at |82k crore

Other subsidies 10,064 9,260 (8.0) 9,260 (8.0) Other expenditure 854,527 959,235 12.3 958,184 12.1 Total 1,110,400 1,219,892 9.9 1,233,138 11.1 Plan Expenditure 453,085 575,000 26.9 575,000 26.9 In line with our expectation to focus on growth, the budgetory allocation towards plan expendtiure is likely to grow

26.9% Y--o-Y in FY15, which would be key kicker for next year GDP growth

Source: Budget Documents MoF ICICIdirect com Research

Total Expenditure 1,563,485 1,794,892 14.8 1,808,138 15.6

Fiscal deficit 508,149 531,177 4.5 590,070 16.1 GDP estimates 11,355,073 12,876,653 13.4 12,876,653 13.4 Fiscal deficit as % of GDP 4.5% 4.1% NA 4.6% NA We estimate fiscal deficit to remain at 4.6% v/s its target of 4.1% primarily due to rollover impact of subsidiaries

and lower tax revenues

3

Source: Budget Documents, MoF, ICICIdirect.com Research

Page 4: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Considering the tax sops in direct & indirect taxes government target of 19 8% YoY growth in gross tax revenues appears optimistic The government expects

Deal Team – At Your ServiceGross tax collection target still appears optimistic…

Gross tax collection growth

Considering the tax sops in direct & indirect taxes, government target of 19.8% YoY growth in gross tax revenues appears optimistic. The government expectsgross tax collection to GDP ratio to move up to 10.6%. We have built in 13.9% YoY growth in gross tax collection largely in line with nominal GDP growth.

Direct vs Indirect taxes

7353 5620FY15IE

29.3 25.3

42.4

9.719.8

13.916.7

-0.55.9

3000

6000

9000

12000

| in

billi

on

01020304050

(%)

295631943671

43784932

55286325

73537353

254129762859

25743553

39604834

50646293

5620

2194FY07FY08FY09

FY10 FY11FY12FY13

FY14PFY15BEFY15IE

0

FY07

FY08

FY09

FY10

FY12

FY13

FY14

P

FY15

BE

FY15

IE

-10

Gross Tax Y-o-Y%

25412194

0 2000 4000 6000 8000 10000 12000 14000

FY07

| in billion

Direct Taxes Indirect Taxes

Gross Tax to GDP

10

11

12

13

(%)

Growth in taxes

010

2030

40

(%)

20-5

1025

40

(%)

9

10

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14P

FY15IE

Source: Budget documents ICICIdirect com Research

0

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

P

FY15

BE

FY15

IE

-20

Direct (LHS) Indirect (RHS)

4

Source: Budget documents, ICICIdirect.com Research

Page 5: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceDisinvestment – pivotal for containing fiscal deficit…

Disinvestment pivotal for containing fiscal deficit • Secondly stake sales in various PSUs to comply with Sebi guidelines ofDisinvestment – pivotal for containing fiscal deficit• The government is targeting disinvestments of | 63,425 crore in FY15BE

• Considering Mr Jaitley’s track record (he was then disinvestment ministerin NDA1) in high profile disinvestments coupled with buoyancy in thecapital market, we anticipate the government will achieve thedisinvestment target

• Secondly, stake sales in various PSUs to comply with Sebi guidelines of75% promoter holding would by itself fetch the government a whopping~ | 80,000 crore, which could be a major kicker in revenue growth. Ouranalysis of the government’s shareholding shows there are 34 such listedentities in which GoI’s promoter stake is greater than 75%. GoI can trim itsownership, going forward. The table below shows the companies withresulting disinvestment proceeds greater than | 1000 crore

FY97 5,000 380 VSNLFY98 4,800 910 MTNLFY99 5,000 5,371 VSNL, CONCOR, GAIL, ONGC,IOC

Year Receipts FromBudgeted (| cr) Actual (|

cr)Compnay

Market Cap (| crore)

Total Promoter Holding (%)

Expected Proceeds from disinvestment

(| crore)Central Bank 7557 89 1031Coal India 234432 90 34344FY99 5,000 5,371 VSNL, CONCOR, GAIL, ONGC,IOC

FY00 10,000 1,860 GAIL, VSNL, BALCO, MFILFY01 10,000 1,871 KRL, CPCL, BRPL,BALCO, LJMCFY02 12,000 5,658 CMC, HTL, VSNL, IBP, PPL, ITDCFY03 12,000 3,348 HZL, IPCL, ITDC, MARUTIFY04 14,500 15,547 JCL, HZL, MUL, IBP, IPCL, CMC, GAILFY05 4,000 2,765 NTPC, ONGC, IPCLFY06 NST 1,570 MUL

Hind.Copper 9673 90 1451MMTC 8840 90 1326Neyveli Lignite 16618 90 2493NHPC Ltd 30629 86 3357NMDC 68808 80 3440S A I L 36117 80 1806SJVN 9783 90 1465,

FY07 NST 0 NAFY08 NST 4,181 MUL, PGCIL, RECFY09 NST 0 NAFY10 NST 23,553 NHPC, OIL, NTPC, REC, NMDCFY11 40,000 22,144 SJVN, EIL, COAL INDIA, PGCIL, MOILFY12 40,000 13,894 PFC, ONGCFY13 30,000 23,956 NBCC, NMDC, OIL, NTPC, NALCO, SAIL

SJVN 9783 90 1465others 6478Total 57191HZL & Balco; Strategic Stake Sale 21600Grand Total 78791

• Thirdly, GoI can raise funds worth ~| 50,000 crore through Specified

Source: MoF Department of disinvestments ICICIdirect com Research

FY14 40,000 15,819 MMTC, NHPC, EIL, BHEL, CPSE-ETF

Source: Department of Disinvestment

Undertaking of UTI (SUUTI). Formed in 2003, it is an offshoot of theerstwhile UTI and holds significant stakes in ITC Ltd (11.28%, | ~29,000crore), Larsen & Toubro (8.2%, ~| 13,000 crore) and Axis Bank (11.7%,| 10,600 crore)

5

Source: MoF, Department of disinvestments, ICICIdirect.com Research.

Page 6: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceNon plan expenditure: Full burden of rollover subsidies not yet done…

• We expect the non plan expenditure to grow 11 1% YoY to | 12 3 lakh Another key concern area would be a higher interest burden which is likely

Interest as % of GDP

5000 3.4

• We expect the non plan expenditure to grow 11.1% YoY to | 12.3 lakhcrore in 2014-15 slightly higher than government projection of |12.2 crore

• On the fuel subsidy front, we expect an additional subsidy burden of~| 18,500 crore largely (assuming exchange rate of | 60/US$ and averagecrude price of US$110/barrel). In our opinion, the government has nottaken the full impact of previous year’s rollover of subsidy burden.However, if the gross under-recoveries decline to | 98,000 crore from our

i f i FY E d h ll

Another key concern area would be a higher interest burden, which is likelyto go up 13.1% to | 427011 crore on account of higher borrowings of theprevious government

2116

2347

2725 3120 37

75 4270

4270

0

1000

2000

3000

4000

FY10 FY11 FY12 FY13 FY14P FY15BE FY15IE

| bi

llion

2.8

2.93.0

3.1

3.23.3

(%)

current estimates of ~| 1,12,150 crore in FY15E and the government rollsover Q4FY15 subsidy burden to the next year, then the government’sbudgetary target could be met.

• On the positive side, we expect the burden from implementation of theFood Security Bill to be lower than budgeted due to a six month delay inrollout of Food Security Bill coupled with partial implementation (currently25 states and union territories) across the nation

Subsidies break-up

FY10 FY11 FY12 FY13 FY14P FY15BE FY15IE

Interest payment (| billion) As % of GDP

)

• Overall, we expect the total subsidy burden to be around | 2.75 lakh crore( 2.1% of GDP) in FY15E vs. | 2.6 lakh crore ( 2.0% of GDP) projected bythe government

Gross under-recoveries (| Crore)Year FY12 FY13 FY14 FY15ENon plan expenditure

313 438 584 638 728 850 929 1,1501101325766 613 623 700 656 674

730 730384685

969 854 634 827

0

1000

2000

3000

| in

billi

on

Upstream 55000.0 60000.0 67022.4 65,886.7Downstream 43.1 1029.8 2074.6 2000.0Government 83500.0 100000.0 70772.0 44,255.3Total 138542.1 161029.0 139869.0 112142.0

Gross under-recoveries (%)Year FY12 FY13 FY14 FY15E

Non plan expenditure

5076

6087

7211

8183

8920

9967

1110

4

1219

8.9

1233

1

0

5000

10000

15000

8 0 2 P E

| in

billi

on

0

10

20

30

(%)

313 4380

FY08

FY09

FY10

FY11

FY12

FY13

FY14

P

FY15

BE

FY15

IEFood Fertiliser Petroleum Others

Source: Budget Documents ICICIdirect com Research

Upstream 39.7 37.3 47.9 58.8Downstream 0.0 0.6 1.5 1.8Government 60.3 62.1 50.6 39.5Total 100.0 100.0 100.0 100.0

FY0

FY1

FY1

FY14

P

FY15

I

Non-Plan Expenditure Y-o-Y (%)

6

Source: Budget Documents, ICICIdirect.com Research

Page 7: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServicePlan expenditure to grow 26.9% YoY after three year lull…

• Given the government’s high thrust towardsgrowth, the plan expenditure is expected togrow 26.9% YoY to | 5.75 lakh crore after thelull of three years

• Secondly, with more focus towards growthoriented schemes by the government

Social benefits as % of plan expenditure

40

Plan Expenditure growth

0 04000

6000

8000

billi

on 20

30

%)

oriented schemes by the government,allocation towards social benefit schemes islikely to come down to 28.8% in FY15IE from36.6% in FY14P.

25

30

35

FY09

FY10

FY11

FY12

FY13

FY14

P

FY15

IE

(%)

3034 3790

4124

4136

4531 57

50

5750

0

2000

FY10

FY11

FY12

FY13

FY14

P

FY15

BE

FY15

IE

| in

0

10

(

Plan Expenditure Y-o-Y (%)

• The share of capital expenditure in totalexpenditure has come down drastically from22.8% to 12% in the last decade.)

p

Break up of total expenditure (%)

77.5 83.5

85.3

83.1

81.8

6.6

7.2 87

.0

88.2

83.0 89

.8

89.1

86.7

87.9

88.1

88.0

87.9

100

• However, with the new government unveilingits 10 year agenda towards infrastructuredevelopment such as Diamond Quadrilateral,Sagar Mela project, housing to all, etc, the newgovernment needs to allocate more fundstowards capital expenditure as witnessed inthe earlier NDA regime

7 8 7 7

22.5

16.5

14.7

16.9

18.2 23.4

22.8

13.0

11.8 17.0

10.2

10.9

13.3

12.1

11.9

12.0

12.1

-

20

40

60

80-9

9

-00

-01

-02

-03

-04

-05

-06

-07

-08

-09

-10

-11

-12

-13

-14

-15

Source: Budget documents ICICIdirect com Research

the earlier NDA regime

1998

-

1999

-

2000

-

2001

-

2002

-

2003

-

2004

-

2005

-

2006

-

2007

-

2008

-

2009

-

2010

-

2011

-

2012

-

2013

-

2014

-

Revenue Expenditure Capital Expenditure

7

Source: Budget documents, ICICIdirect.com Research

Page 8: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceLong-term measures towards growth and taxation reforms…

Broadening FDI Policy & step towards faster clearances of projects: Tax reform measures:Broadening FDI Policy & step towards faster clearances of projects:

India’s policymakers in the recent past have shown increased willingnessto open up the country’s shores to foreign investments in sectors liketelecom, airlines and retail. These sectors and many others where policieshave been relaxed received mixed amounts of such FDI. However, inCY14 the country is in need of strong public-private-partnership (PPP) tofund projects in cash hungry sectors like Railways, insurance, defence andinfrastructure Strong inflows in FDI for manufacturing sector could be

Tax reform measures:

• Retrospective taxation: The Finance Minister refrained from reversing the2012 amendment to the Income Tax Act relating to retrospective taxationprovisions. However, he emphasised that all fresh cases arising out ofsuch amendments will be looked into by a high Level CBDT committee,thereby eliminating the sole authority of the Income Tax officer. He furthersaid this power has to be exercised with extreme caution andj di iinfrastructure. Strong inflows in FDI for manufacturing sector could be

instrumental in creating much needed jobs to the young and bourgeoningIndian youth

• In our view, the present Budget shows understanding of the importanceof long term FDI into the above-mentioned sectors. They have, thus, atpresent, increased the limit in both insurance and defence from theexisting 26% to 49% with full Indian management and control via the FIPB

Th h l l d di i f FDI i h i f

judiciousness

In an attempt to allay fears among the investor community, the ministersaid the government will not ordinarily change policies retrospectively,which creates a fresh liability. He added that it is committed to provide astable and predictable taxation regime that would be investor friendly andspur growth

route. They have also relaxed preconditions for FDI in the infrastructurespace for the development of “Smart Cities”

• The FY15E defence outlay for purchases stand at ~$15 billion, whichindustry experts believe could double by the end of the decade. This FDIand PPP in this space could, thus, lead to strong technologicalimprovements domestically along with employment generation

• The eBiz platform aims to create a business and investor friendly

• SEZ roadmapThe Budget did not provide any relief with respect to units operating inSEZ areas as regards MAT and DDT. However, the Budget has simplifiedcertain procedural aspects of operations within SEZ. To a certain extentthere is a disappointment as the market was expecting some structuralchanges to make SEZs attractive again

• The eBiz platform aims to create a business and investor friendlyecosystem in India by making all business and investment relatedclearances and compliances available on a 24x7 single portal

REITs:• The Budget announced necessary incentives to REITs in the form of tax

pass through status. This move, we believe, would allay concerns over

• GSTThe Union Budget has remained non-committal on the timeline ofimplementation of the GST. However, the Finance Minister hasemphasised on its implementation during the current year after settlingthe remaining revenue sharing concerns of the states. Although there is adisappointment as the FM did not mention the deadline for itsi l t ti th l t it i l t ti i lik l b th

p g , , ydouble taxation and, thus, pave the way for REIT listing in India

• The above move would make REIT listing a reality in India, in our view.We highlight that with the listing of REITs in India, real estate developerswould be able to unlock the value of their lease portfolio, improve theirliquidity position significantly and boost valuations of commercial andretail assets, which are currently valued at high discount to their global

implementation, the language suggests its implementation is likely by theend of the current financial year

• DTCThe Finance Minister has not considered DTC as the Finance Ministry isstill evaluating and considering the comments received from stakeholderson the revised code. The implementation of DTC was anyway notexpected given only a few days were available to the new government to

8

peers. expected given only a few days were available to the new government toconsider major structural changes in direct taxes

Page 9: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

B i i li i i d f d f i i i (

Deal Team – At Your ServiceTax sops to encourage personal savings…

• Basic exemption limit increased to | 250,000 from | 200,000 and for senior citizen (60-80yrs) to | 300,000 from | 250,000

For individuals, this will save | 5150 (tax saved 10% of | 50,000 , i.e.| 5000 and education cess of 3% on the same).

• Deduction under section 80C increased to | 150,000 from | 100,000We believe this a positive step to encourage domestic savings. Most tax

Total Income Tax Rate Total Income Tax Rate Up to | 2,00,000 NIL Up to | 2,50,000 NIL | 2,00,001 to | 5,00,000 10% | 2,50,001 to | 5,00,000 10% | 5,00,000 to | 10,00,000 20% | 5,00,000 to | 10,00,000 20% | 10 00 000 and above 30% | 10 00 000 and above 30%

Change in basic tax exemption limit

payers utilised the | 1 lakh deduction entirely. The additional deductionwill further reduce the tax burden by extra | 10,450 for individuals fallingin 20% slab rate and | 15,450 for individuals in the highest tax bracket.

• Deduction of interest paid on loan increased to | 200,000 from | 150,000For individuals, who have housing loans on their self occupied houseproperty can avail additional | 50,000 deduction as interest paid. Thiseffecti el ed ce the ta he ha t pa b 15 450 f i di id al falli i

| 10,00,000 and above 30% | 10,00,000 and above 30%

Tax savings as per slab rates …

G T bl I 500 000 1 000 000 2 000 000 500 000 1 000 000 2 000 000 Pre-Budget Post Budget

effectively reduces the tax he has to pay by 15,450 for individuals falling inthe highest tax slab

• Other measuresFor debt mutual funds, the period of holding the units has been increasedto 36 months from 12 month earlier for computation of capital gains. Alsothe benefit under section 112 A of paying lower tax at a rate of 10% hasbeen removed. We believe this will encourage long term investments in

Gross Taxable Inccome 500,000 1,000,000 2,000,000 500,000 1,000,000 2,000,000 Less:Income From House Property 150,000 150,000 150,000 200,000 200,000 200,000

Deduction under section 80C 100,000 100,000 100,000 150,000 150,000 150,000

Net Taxble income 250,000 750,000 1,750,000 150,000 650,000 1,650,000

been removed. We believe this will encourage long term investments inmutual fund debt schemes. However, for a less than three yearsinvestment horizon, attractiveness of debt mutual schemes over fixeddeposits has been reduced as capital gains arising in the growth schemeof mutual funds sold within three years will be taxed @30% same as thatapplicable on interest received on FD.

Dividend distribution tax will now be applied on gross dividend. This will

Tax | 2,00,001 to | 5,00,000 5,000 30,000 30,000 - 25,000 25,000 | 5,00,000 to | 10,00,000 - 50,000 100,000 - 30,000 100,000 | 10,00,000 and above - - 225,000 - - 195,000

Total Tax 5,000 80,000 355,000 - 55,000 320,000 Education Cess 150 2,400 10,650 - 1,650 9,600 pp g

marginally reduce the dividend income earned by individuals

Source: Budget documents ICICIdirect com Research

Total Tax 5,150 82,400 365,650 - 56,650 329,600

Tax Saved 5,150 25,750 36,050

9

Source: Budget documents, ICICIdirect.com Research

Page 10: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceSector Impact…

Key announcement Impact Our ViewBanks permitted to raise long term funds for lending to infrastructure sector Positive Banks will be permitted to raise long term funds for lending to infrastructure sector with

minimum regulatory pre-emption such as CRR, SLR and priority sector lending. MinimumCRR/SLR requirement will reduce the overall cost of funds for banks. Besides, mobilisation oflong term funds will improve the ALM of banks. IDFC will be one of the major beneficiaries

C i l f bli b k b i d b lli h il N l I d h i l i (| 240000 b 2018) PSU b k lik l

Banks

Capital of public sector banks to be raised by selling shares to retailinvestors while the government continues to have majority shareholding

Neutral In order to meet huge capital requirement (| 240000 crore by 2018), PSU banks are likely toissue fresh shares to retail investors. However, the government will continue to maintain itsmajority shareholding

Setting of six new debt recovery tribunals (DRT) Positive Six new DRTs to be set up, which will aid faster improvement of asset quality. PSU banks tobe major beneficiaries as their stressed assets (gross NPA + restructured assets) proportion ishigh and new DRTs will aid in faster recovery of these stressed assetsg y

The interest rate subvention scheme for short-term crop loans to becontinued

Neutral Interest rate subvention for short-term crop loans will be continued wherein the loans areextended at concessional rate of 7% and a farmer who pays on time will be able to get credit at4% per annum. This will enable the banking industry to achieve their priority sector lendingtargets and improve the farmer's repaying ability

Tax exemption limit for interest on self occupied housing loans is Positive Such tax incentives will further induce an individual to avail the housing loan. This will supportincreased from | 1.5 lakh to | 2 lakh the credit growth of both banks and NBFCs. Mainly beneficial to housing finance companies

like HDFC, Gruh Finance and Repco Home Finance

FDI in insurance increased from 26% to 49% now Positive Increase in FDI limit will enable insurance companies to raise capital in order to fund theirfuture growth. Max India and Reliance Capital are major beneficiaries. Also, it will allowcompanies like HDFC to unlock value in its insurance subsidiaries

10

Page 11: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Key announcement Impact Our ViewCapital Goods & Power

Deal Team – At Your ServiceSector impact…

Key announcement Impact Our ViewSunset clause of claiming Tax Holiday under Section 80IA has beenextended by another 3 years till FY17

Positive The move will encourage investments in the power sector and will benefit plants gettingoperation by FY17. All power companies like NTPC, Powergrid, NHPC, Reliance Power, JPPower etc likely to benefit

Solar Power - a) Basic custom duty exempted for inputs used in themanufacturing of EVA sheets, Black sheet & on flat copper wire used in themanufacturing of PV ribbons. B) Excise duty exempted for EVA sheets,

Positive The move aims at encouraging investment in solar power which will enable the government tomeet its 20GW solar capacity addition by 2022. Positive for solar EPC players, cell and modulemanufacturers. The move will reduced the capital cost for setting up solar power project. Tata

solar back sheets, solar tempered glass, flat copper wire & machinery andequipment required for setting up solar plant. c) To setup Ultra Model SolarPower projects in Rajasthan, TN, Ladakh & J&K region and setting up of 1lakh solar pumps across the country

Power, Reliance Power, NTPC and NHPC likely to benefit from the move as they plan to addsolar capacities going ahead. It will also benefit player like Shakti Pump as they have exposureto solar pump business

Wind Power - Reduction in basic custom duty from 10% to 5% and waiverof excise duty on forged steel rings used in the manufacturing of bearingsof wind generators Furthermore Special Additional Duty (SAD) of 4% have

Positive The move will encourage investment in wind power capacity as the duty reduction will lowerthe cost of setting up wind power plant. Tata Power, Reliance Power and other big companiesplanning to foray into wind segmentof wind generators. Furthermore, Special Additional Duty (SAD) of 4% have

been exempted on parts and raw material used for manufacturing windgenerators

planning to foray into wind segment

Duty on imported coal raised by 0.5% to 2.5% from existing 2%. Also coalcess increased to |100/tonne from |50/tonne

Negative The move will lead to rise in variable cost. The impact would be neutral for companiesoperating under regulatory business model (like NTPC where cost is pass through) and Case - I& II (like Tata Power, Reliance Power as change in domestic law is allowed as pass through).However margins of companies operating under merchant mechanism (like JSW Energy,g p p g ( gy,Adani Power and JP Power) is likely to get marginally impacted

| 500 crore for Deen Dayal Upadhyaya Gram Jyoti Yojana for feederseparation to augment power supply to the rural area

Positive The move will help augment power supply to the rural areas and strengthen sub-transmissionand distribution systems in the rural area so as to provide 24x7 power supply

FDI in defence with more clarity on technology transfer agreement androadmap for increasing indigenisation.

Positive Bigger players like L&T, BHEL and BEL likely to benefit from this move as players like L&T haveexisting technology tie-ups across the defence value chain.

Increased capex on road development which includes 8000 km ofordering during FY15

Positive As a significant share of orders will be based on EPC basis, we believe L&T will be one of thekey beneficiary. Also, rebidding of BOOT projects will create opportunities for L&T to expand its asset development portfolio.

PSU's to spend | 247941 crore capex to revive the capex cycle, Positive This will help create domestic ordering opportunities for major equipment and EPC players likeL&T, BHEL, Thermax etc.

Ordering for 16 new ports, establishment of airports in Tier I and II cities Positive Award of orders in form of EPC orders or BOT projects will create opportunities for companieslik L&T C i

11

like L&T, CumminsEncouraging development of metro rail systems via PPP mode. Alsoearmarking |100 crore for metro projects in Lucknow and Ahmedabad

Positive Positive for companies like L&T, Siemens and Alstom India.

Page 12: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceSector impact…

CementKey announcement Impact Our ViewGovernment has proposed allocation of | 12,000 crore to National HousingBoard to support rural housing and affordable housing as well asinvestment of | 37,880 crores in NHAI for the construction of roads

Positive The proposed budgetary amount on Housing and Road construction will help in reviving theoverall demand of cement in the long run

Key announcement Impact Our ViewConsumer Durables

Key announcement Impact Our ViewExemption of basic custom duty CRT Positive Colour picture tubes have been exempted from basic customs duty to make cathode ray TVs

cheaper and more affordable to weaker sections

Basic custom duty on LCD/LED TV pannel of below 19' reduced to nil from10%

Positive This will encourange production of LCD and LED TVs below 19 inches in India

Announcement of a roadmap for GST in the course of this year and likelyapproval of the legislative scheme which enables the introduction of GST

Positive A road map could be announced in the near future. Implementation of GST would help toeliminate multiple taxes for manufacturers and finally beneficial for the customers

Reduction of excise duty from 10% to 6% on packaging machines Positive Reduction of excise duty on packaging machines would benefit the packaging compnies likeEssel Propack, Paper Products etc

12

Page 13: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

FMCG

Deal Team – At Your ServiceSector impact…

Key announcement Impact Our ViewExcise Duty on cigarettes of length less than 65mm has been increased by72%. Hence, excise/stick on 64mm cigarettes would increase from |0.7 to|1.15.

Negative The significant hike in excise duty for less than 65mm segment would impact VST Industriesthe most. VST had recently shifted ~50% of its portfolio mix to 64mm cigarette segmentfollowing no increase in excise duty in less than 65mm segment and ~20% increase in exciseduty on above 65mm segment in FY14 Budget. Hence, such a steep hike would force VST toshift away its focus from 64mm segment and induce price hike of ~20% limit the negativeimpact on its margins We believe the shift in portfolio would happen only gradually and theimpact on its margins. We believe the shift in portfolio would happen only gradually and thesteep hike in prices would strain its volume growth. We estimate the effective excise/stick forVST to increase to |1.3 in FY15E from |1 in FY14 and volume de-growth of ~10% in FY15Eentailing a price increase of ~20%. Hence, we expect the overall margins to witness a hit of~300 bps YoY to 24.7% in FY15E, pulling down the profits by ~12% in FY15E. The impact ofhike on ITC will be marginal as 64mm constitutes less than 10% of ITC's portfolio.

Excise Duty on cigarettes of length greater than 65mm has been Neutral The lower than expected (~133%) increase in excise duty is sentimentally positive forExcise Duty on cigarettes of length greater than 65mm has beenincreased by 11-21%.

Neutral The lower than expected (~133%) increase in excise duty is sentimentally positive forcompanies (ITC) whose sales mix is largely constituted by above 65mm length cigarettes.Further, led by ITC's strong pricing power (~75% market share by volume) we believe thecompany would pass on the excise impact through higher prices in FY15E, too. Though, athird consecutive year of steep price hike (following third year of +15% excise hike) wouldkeep volume growth strained (we expect volume de-growth of ~5% in FY15E). Hence, weexpect ITC to take a price hike of ~18% in FY15E, increasing its realization/stick to |4.11 from|3.5, excise/stick from |1.6 to |1.8 and EBIT/stick from |1.2 to |1.4. With a lower thanexpected excise and price increase we expect ITC to sustain its margins at ~38% in FY15E.

The custom duty on crude palm oil and industrial crude oils has beenreduced from 7.5% to 0%.

Positive The reduction in customs is positive for all soap and personal product manufacturers like HUL,ITC, Dabur and Godrej Consumer as palm oil is the key raw material for manufacturing soapsand personal care products.

Fund allocation for welfare schemes & MGNREGA remains at last year's Negative With the government maintaining its allocation for MGNREGA (|34,000 crore) and socialFund allocation for welfare schemes & MGNREGA remains at last year slevel not witnessing any significant increase in allocation

Negative With the government maintaining its allocation for MGNREGA (|34,000 crore) and socialwelfare schemes at last year's level, rural consumption is not expected to experience the samespurt witnessed during FY10-13. Companies with higher higher focus on rural sales will henceseek to provide more value added products to the rural consumers.

Key announcement Impact Our ViewAnnouncement of providing necessary incentives for Real Estate Positive With high debt on books, REITs will give much needed breather to the hotels by giving

Hotel

13

Announcement of providing necessary incentives for Real EstateInvestment Trusts & Infrastructure Invesment Trusts which will have passthrough for the purpose of taxation.

Positive With high debt on books, REITs will give much needed breather to the hotels by givingopportunity to de-leverage

Page 14: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceSector impact…

InfrastructureKey announcement Impact Our ViewA modified REITS type structure for infrastructure projects as InfrastructureInvestment Trusts (InvITs), which would have a similar tax efficient passthrough status, for PPP and other infrastructure projects

Positve We believe that this move would boost big infrstructure developers in the form of freeing up ofequity which again would be instrumental for pick up moribund capex cycle. Key benficies:GMR Infra, JP Associates, IRB Infra, Sadbhav Engg

NHAI to target 8000km road awarding in FY15 Positive The targeted awarding would provide order inflow opportunities for Road developers such asITNL, IRB Infra, Sadbhav Engg and Ashoka Buildcon.

Infrastructure

Proposes allocation for NHAI at | 37500Cr Positive We believe that the allocated amount would be instrumental in EPC awarding which willbenefit contractors such as Simplex Infra and Supreme Infra

Proposes allocation for PMGSY at | 14389 Cr Positive Positive for NBCC which is into rural road construction projects

An institution to provide support to mainstreaming PPPs called 3P Indiawill be set up with a corpus of | 500 crores

Positive The body is expected to expedite the delays in clearances and other dispute redressalmechanism which has been an overhang for the PPP projects in the roads and power segment

Key announcement Impact Our ViewAnnounced sixteen port projects with focus on port connectivity andallocated |11635 crore for phase-1 of outer harbour development in

Positive Bodes well for port players to develop and operate ports across the country

Logistics

allocated |11635 crore for phase 1 of outer harbour development inTuticorin

SEZ to be developed at Kandla and JNPT Positive Augurs well for CFS/ICD operators in these ports

24x7 customs clearence facilities extended to 14 more seaports andimplemention of "Indian Customs Single Window Project"

Positive Improves the turnaround time for logistics company and ports as reduced interface withgovernment agencies would improve dwell time and reduce cost of doing business

Announcement of a roadmap for GST during the current year and expectedapproval of the legislative scheme which would enable introduction of GST

Positive Though not much clarity is available on the subject, a roadmap is expected to be announcedduring the year. Implementation of GST would enable taxation on stock transfers with creditavailable on inter-state transactions which would lead to consolidation of warehousingcapacities and lead to economies of scale for the logistics sector

14

Page 15: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceSector impact…

ITKey announcement Impact Our ViewFocus on developing "Smart Cities" by allocating Rs. 7,060 crores for theinitiative

Positive This could boost IT spending in developing smart facilities in healthcare, education, security,energy, logistics, financial services, hospitality and real estate verticals

Electronic Visa Facility (e-Visa) would be introduced in a phased manner atnine airports in India with necessary infrastructure within the next sixmonths

Positive This could bring additional source of revenue for IT companies focusing on travel vertical likeTCS, Infosys, NIIT Tech and MindTree

months1. Government proposed multi-skill programme called Skill India with anemphasis on employability and entrepreneur skills and provide training andsupport for traditional professions.2. Allocated Rs. 100 crores for setting up virtual classrooms asCommunication Linked Interface for Cultivating Knowledge (CLICK) andonline courses

Positive Companies focused on skill development and education like NIIT, Aptech could be a keybeneficiary of this initiative

1. Rs. 500 crores proposed for "Digital India", a pan India programme toimprove access to services through IT enabled platforms, increasedindigenous production of IT hardware and software for exports andimproved domestic availability, provide training in IT skills and E-Kranti forgovernment service delivery and governance schemes2. Creation of eBiz platform to create a 24x7 single portal for all clearanceswith an integrated payment gateway All Central Government Departments

Positive Upgradation of legacy IT systems would revive the domestic IT market across the entire valuechain. Focus on software products could be beneficial for licence vendors like Sonata Softwareand promote enterpreneurial initiative

with an integrated payment gateway. All Central Government Departmentsand Ministries will integrate their services with the eBiz platform on priorityby 31 December 2014Promote SEZs by providing better infrastructure and effective use ofunutilized land

Positive This could promote investment in SEZ where the companies could receive tax benefitspertaining to SEZ

Imposed education cess on imported electronic products while allinputs/components used in the manufacture of personal computers are

Positive This will provide parity between domestically produced goods and imported goods and couldboost manufacturing and reduce dependence on importsinputs/components used in the manufacture of personal computers are

exempt from 4% special additional duty boost manufacturing and reduce dependence on imports

Sales on online and mobile advertising is included in the ambit of servicetax. Similarly, tax is being proposed on the service provided by radio-taxisto

Negative This could impact companies in online classifieds space (JustDial, Quikr) and startups in radiotaxi services (Meru, Ola).

15

Page 16: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceSector impact…

MediaKey announcement Impact Our ViewAnnouncement of a roadmap for GST in the course of this year and likelyapproval of the legislative scheme which enables the introduction of GST

Positive GST if implemented will safeguard the media companies across genres such as CableDistrubutors, DTH, Movie Exhibitors, Distributors from the brunt of double taxation by payingservice tax to the Centre and Entertainment Tax to the State Government. GST will lead to oneuniform tax levy for the companies and would be a positive for PVR, Eros, Hathway, Dish

The Finance Minister has continued with the levy of service tax on sale of Neutral The imposition of the service tax in the online and mobile advertising is a negative as it will

Media

The Finance Minister has continued with the levy of service tax on sale ofspace or time for advertisements in broadcast media. The service taximposition has however been extended to the online and mobileadvertising. Sale of Space for advertisements in print media continues to be excluded from service tax

Neutral The imposition of the service tax in the online and mobile advertising is a negative as it willentail additional outgo from the revenues. However at this point in time, both these segmentsare in their nascent form with a negligible contribtuion to the total advertising pie. The servicetax scenario in the print and broadcasting remains status quo.

Key announcement Impact Our ViewMetals & Mining

y pExport duty on bauxite increased from 10% to 20% Positive Increase in export duty of bauxite is likely to augment availability of bauxite for domestic

aluminum manufacturers. It will benefit Sesa Sterlite and Hindalco in our coverage universe

Investment linked deduction being extended to slurry pipelines for thetransportation of iron ore

Positive It will aid in increase in supply of iron ore for domestic steel players. It will also aid inincreasing the evacuation capability of merchant miners such as NMDC

Royalty rates on minerals to be revised Negative Revision in royalty rates of minerals is likely to adversely impact domestic metal majors inRoyalty rates on minerals to be revised Negative Revision in royalty rates of minerals is likely to adversely impact domestic metal majors ingeneral. A likely upward revision in rates will augment the cost of production.

Basic customs duty on imported flat-rolled products ofstainless steel increased from 5% to 7.5%.

Positive The domestic stainless industry has been facing a threat in the form of surge in imports fromvarious countries, especially China. The increase in customs duty on imported flat-rolledproducts of stainless steel is likely to protect domestic firms such as Jindal Stainless Ltd

Basic customs duty on metallurgical coke increased from Nil to 2 5% Negative Negative for domestic steel companies who are dependent on imported metallurgical coke TheBasic customs duty on metallurgical coke increased from Nil to 2.5% Negative Negative for domestic steel companies who are dependent on imported metallurgical coke. Themove will spike up their operating costs.

16

Page 17: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Oil & Gas

Deal Team – At Your ServiceSector impact…

Key announcement Impact Our ViewLaying down of 15000 km of gas pipelines across the country through PPP route

Positive This move will be positive for gas utility companies that will benefit from an improvement inthe gas pipeline network and higher gas volumes over the long term

Focus on increased penetration and usage of piped natural gas Positive This move will be positive for all city gas distribution companies like GAIL, Indraprastha Gas,Gujarat Gas, etc

No changes and announcements made on the petroleum subsidy Marginally negative This would be marginally negative for PSU oil companies as roadmap for reforms in thesubsidy sharing mechanism was expected by the markets.

Accelerate production & exploitation of coal bed methane reserves andmaximising crude production using modern technology to revive old orclosed wells

Positive Oil upstream companies would be the beneficiaries as it expedite development of reserves andhence will result in higher production of oil and natural gas

Reduction in basic customs duty for petrochemicals and chemicals to Marginally positive Beneficial for RIL only to the extent of transfer pricing, since it is fully integrated. Positiveencourage new investment and capacity addition impact on earnings can be maximum 1-2% from these reductions in duties

  Central Excise duty on Branded Petrol is being reduced from Rs.7.50 perlitre to Rs. 2.35 per litre.

Neutral No impact on Oil Marketing companies as the reduction in excise duty would be passedthrough to the customers and done to increase sales of branded petrol

Key announcement Impact Our ViewIncentive in the form of Tax Pass through status for REITs Positive This will pave way for REIT listing in india, which would lead to compression in cap rate and

Real Estate

better valuation for RE developers. Additionaly, it will free up capital for the developers. KeyBeneficiaries: Oberoi Realty, DLF, Prestige Estate & Phoenix Mills

To provide | 7060 crore towards development 100 smart cities bymodernizing the existing mid-sized cities.

Positive This move would provide a huge opportunity for real estate developers as newer cities wouldcreate demand for housing. Key Beneficiaries: Mahindra Lifespace, Godrej Properties, PrestigeEstates etc

To encourage development of Smart Cities requirement of the built up area Positive This move will boost the FDI flow in the housing segment leading to better capitalisation in the To encourage development of Smart Cities, requirement of the built up areaand capital conditions for FDI reduced from 50,000 sq. metre to 20,000sq. metre and from $10 mn to USD 5 mn respectively with a three year post completion lock in. Furthermore, projects which commit at least 30 percent of the total project cost for low cost affordable housing to beexempted from minimum built up area and capitalisation requirements

Positive This move will boost the FDI flow in the housing segment leading to better capitalisation in the sector. Key beneficieries include leading real estate developers such as DLF, MahindraLifespace, Oberoi Realty etc

Increase in the deduction limit on account of interest on loan in respect of Positive This would be another demand booster for real estate

17

Increase in the deduction limit on account of interest on loan in respect ofself occupied house property from | 1.5 lakh to | 2 lakh

Positive This would be another demand booster for real estate

Page 18: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceSector impact…

RetailKey announcement Impact Our ViewAnnouncement of a roadmap for GST in the course of this year and likelyapproval of the legislative scheme which enables the introduction of GST

Positive While no clear details were announced, a roadmap could be announced in the course of theyear. This will streamline the tax collection and increase revenues for the government. Also,with avoidance of double taxation, the retailers will benefit. This could aid in enhancement ofoperating margin and will be positive for domestic retailers like Shoppers Stop, Future Retail,Trent, Reliance Retail etc

Retail

Relaxation of personal income exemption limit from | 2,00,000 to |2,50,000 and also increase in the limits under section 80 C and the homeloan limits

Positive This will lead to a higher disposable income which in turn will boost consumption

Reduction of excise duty on manufacture of footwear from 12% to 6% (onretail price of | 500-1000/pair)

Positive This will be positive for shoe manufacturing companies like Bata, Liberty Shoes, RelaxoFootwear etc. We expect Bata's EPS to improve in the range 1-2% depending on the productmix

No announcement on import duty on gold Negative The street keenly expected some positive announcements with regards to reduction of importduty on gold. However, the same did not come through. We remain hopeful of some positiveannouncement over the course of the year

Customs duty on semi-processed, half cut or brokendiamonds, cut and polished diamonds and coloured gemstones

i li d 2 5%

Neutral While this will not have any material impact, this move has mainly been taken to preventmisuse and avoid any disputes for calculation purposes. Any increase in costs will be passed

b h j llrationalized at 2.5% on to consumers by the jewellers

Key announcement Impact Our ViewComprehensive policy for Indian Shipbuilding Industry to be announced inthe current fiscal

Positive Augurs well for ship builders as they are negatively skewed against foreign players. Renewalof shipbuilding subsidy in the new policy would provide the necessary respite to the players

Jal Vikas marg to be developed between Allahabad and Haldia on river Positive Thrust to inland shipping industry and expected to provide support to movement of bulk cargo

Shipping

Jal Vikas marg to be developed between Allahabad and Haldia on riverGanga for distance of 1620 kms at an estimated cost of |4200 crore

Positive Thrust to inland shipping industry and expected to provide support to movement of bulk cargothrough coastal and inland waterways

18

Page 19: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Deal Team – At Your ServiceSector impact…

TelecomKey announcement Impact Our ViewThe Finance Minister has set aside a sum of | 500 crore to bridge the gapbetween the digital scenario in various parts of India. The idea is toprovide broadband connectivity at the village level. A National Rural Internetand Technology Mission for services in villages and schools, training in ITskills and E-Kranti for government service delivery and governance schemeh l b d

Positive The governement initiatives to connect villages through broadband augurs well for the telecomsector as a whole. It will help increase the overall broadband subscribers and lead to betterinternet penetration

has also been proposed

Key announcement Impact Our ViewIncrease of duty-free entitlement for import of trimmings, embellishmentsand other specified items from 3% to 5% of the value of their exports

Positive While this is insignificant, it will be beneficial for garment exporters like Alok Industries,Arvind, etc.

Textiles

Removal of 5% customs duty on spandex yarn Positive Beneficial for innerwear manufacturers like Page Industries, Lovable Lingerie, Rupa & Company,etc.

(a) Proposal to set up six textile mega-clusters in Bareily, Lucknow, Surat,Kuttch, Bhagalpur, Mysore and Tamil Nadu with an allocation of | 200crore; (b) Setting up of trade facilitation centre and a crafts museum with an

Positive Dedicated textile clusters will aid smaller players in the textile industry as they can get a platformto showcase their skills. Similarly, trade facilitation centres and other initiatives will also aid thesmall and medium players in the industryg p

outlay of | 50 crore; (c) Setting up of Hastkala Academy for thepreservation, revival and documentation of the handloom/handicraft sectorin PPP mode with an outlay of | 30 crore and (d) setting up of PashminaPromotion Programme for the development of other craft of Jammu &Kashmir with an outlay of | 50 crore

p y y

19

Page 20: Union Budget Review 2014 - 2015 Getting the right ...content.icicidirect.com/mailimages/IDirect_BudgetReview_2014.pdfUnion Budget Review 2014 - 2015 Union Budget Review 2014 - 2015

Pankaj Pandey Head – Research [email protected]

ICICIdirect.com Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No 7, MIDCAndheri (East)

DisclaimerThe report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in anyway, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior

Andheri (East)Mumbai – 400 [email protected]

y, , p , p , y p p y , pwritten consent of ICICI Securities Ltd (I-Sec). The author may be holding a small number of shares/position in the above-referred companies ason date of release of this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of releaseof this report. This report is based on information obtained from public sources and sources believed to be reliable, but no independentverification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informationalpurpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or otherfinancial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or

i i bl i ifi i Th i i di d d i i d i hi bstrategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not besuitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions andneeds of specific recipient. This report may not be taken in substitution for the exercise of independent judgment by any recipient. The recipientshould independently evaluate the investment risks. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of theuse of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth inprojections. I-Sec may have issued other reports that are inconsistent with and reach different conclusion from the information presented in thisreport This report is not directed or intended for distribution to or use by any person or entity who is a citizen or resident of or located in anyreport. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in anylocality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or whichwould subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may ormay not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come arerequired to inform themselves of and to observe such restriction.