union budget review

7/29/2019 Union Budget Review

1/27

Union Budget 201314 (First cut)

Credible and balanced budget

Edelweiss Research February 2013


2/27

Union Budget FY14: Highlights

Fiscal math largely credible. Revenue slightly aggressive, but expenditure and subsidies well provided for.

Consolidation process continues. Fiscal deficit for FY14 budgeted at ~4.8% of GDP (our estimate ~5.0% of

GDP).

Budgeted net borrowing is at ~INR 4.8tn. We believe it could be a bit higher by ~INR200bn. However, grossborrowing came higher than expected as government intends to rebalance the maturity profile of debt.

Budget was growth supportive as it intended to support investments through extra tax exemptions forinvestment in plant and machinery. Further, it substantially raised the limits of taxfree infra bonds.

Some attempt has been made to boost financial savings by liberalising coverage of Rajiv Gandhi EquityScheme (RGES) and insurance sector. Further, the finance minister announced that inflation indexed bondswill be introduced possibly with the intent to curb gold imports.

While the finance minister cited CAD as a big worry, no export boosting measures were announced.

Positively impacted companies are:y Capital goods companies namely Thermax, Cummins, ABB and Siemens

y

y

y

y

Refiners namely IOCL, BPCL, HPCL, MRPL and RILHousing finance companies namely LIC Housing Finance, Gruh Finance and Dewan HousingBus manufacturers namely Ashok Leyland, Tata Motors and Eicher Motors

Affordable housing developers namely Jaypee Infratech & Puravakankara Projects

2


3/27

FY14 S f hi i l d b i l i i l d l di

Fiscal math looks largely credible

Fiscal math largely credibley Fiscal consolidation process continues, although at a bit slower pace compared to FY14. The FM has announced

gross fiscal deficit for FY14 at 4.8% of GDP (against 5.2% of GDP in FY13).

y Broadly speaking the Budgeted fiscal target is certainly in the realm of possibility, we think that fiscal deficit of 5%

of GDP is more realistic.

Revenue slightly aggressivey Gross tax revenue collection of the government will improve on account of better tax buoyancy on account of

improving economy and some changes in the taxes, which will add to government kitty. However, the benefits of headline

tax rate hikes in indirect taxes last year will be absent in FY14. Overall, we think that 18% YoY growth in tax revenues is

more realistic compared to 19% YoY assumed by the government (against ~17% YoY achieved in FY13).y On nontax revenues side as well, we think FM has been a bit aggressive, particularly with regards to telecom revenues .Expenditure does not seem to be underbudgeted

y Budgeted growth of 16% YoY in expenditure is sizeable and we do not see any material risk of slippage on this front.

Subsidies (at ~2% of GDP) have been adequately provided especially given that government is undertaking periodic dieselprice hikes.y Meanwhile, sharp cuts in plan expenditure undertaken in FY13 are being compensated by budgeting 29% YoY growth in

FY14. Some of this is related to substantial increase in rural development spending.

3


4/27

Minor changes in taxes

Slight changes in direct and indirect taxesy

y

y

y

y

Minor changes in the direct taxes. Surcharge raised to 10% from 5% on corporate taxes.Surcharge introduced on super rich (income above INR 10mn)

No changes in headline indirect taxes rates.

Voluntary compliance encouragement scheme introduced in service taxes for the defaulters.

DTC bill to be introduced in this budget session itself.

y GST no specific timeframe for implementation mentioned. However, FM mentioned that significant progress has beenmade and he hoped to introduce constitutional amendment and draft bill in GST in coming months.

4


5/27

T f i f b d t i f INR250b t INR500b

Few positive announcements

Positive for investmenty Investment allowance of 15 % in FY14 and FY15 to manufacturing companies which invest more than INR1bn in plant

and machinery.Tax free infra bonds to increase from INR250bn to INR500bn.yy Road regulator to iron out issues in the sector.

Incentives to boost financial savingsy

y

y

RGES scheme to incentivise households savings in equities and mutual funds broadened in coverage.

Announcement to introduce inflation indexed bond. Certain steps to increase the coverage of

insurance.Othersy Additional tax deduction for first time house buyer (loan up to INR 2.5 million)

5


6/27

3 911 3 454 3 210

16 631 14 308 13 186

5 0 5 2 5 9

Fiscaldeficit likely to be~5% of GDPin FY14

Fiscal Deficit FY14 at 5.0% of GDP (INR bn)Particulars FY14 (Edel) FY14 (BE) FY13 (RE) FY13 (BE) FY12 (Actual)Ta x revenue (net) 8,741 8,841 7,421 7,711 6,297

Indi rect ta x 5,565 5,650 4,695 5,054 3,924

Nonta x revenue recei pts 1,624 1,723 1,297 1,646 1,217

Capi tal recei pts 605 665 381 417 369

TOTAL RECEIPTS 10,970 11,228 9,099 9,774 7,883

Nonpl an expendi ture 11,078 11,100 10,016 9,699 8,920

Food subsidy 950 900 850 750 728 Oil Subsidy 650 650 969 436 685

b) Interes t payments 3,707 3,707 3,167 3,198 2,732

d) Ca pi ta l expendi ture 1,100 1,171 819 1,043 799

Revenue 4,433 4,433 3,434 4,205 3,337

TOTAL EXPENDITURE 16,631 16,653 14,308 14,909 13,186

Fiscal deficit 5,662 5,425 5,209 5,135 5,303

Revenue defi ci t/GDP (i n %) 3.6 3.3 3.9 3.4 4.4

RE: Revised Estimates BE: Budget EstimatesSource: Budget documents, Edelweiss research

6

Fi s ca l defi ci t/GDP (i n %) 5.0 4.8 5.2 5.1 5.9

Revenue defcit 4,046 3,798 3,912 3,503 3,944

Capital 1,121 1,121 858 1,005 786

Pl a n expendi ture 5,553 5,553 4,292 5,210 4,266

c) Other revenue expendi ture 3,911 3,911 3,454 3,557 3,210

Interest and others subsidy 100 101 98 104 66

Fertilizer subsidy 660 660 660 610 700

a) Total subsidy 2,360 2,311 2,577 1,900 2,179

of which disinvestment 400 400 240 300 181

of which telecom & 3G 300 408 194 580 174

Les s : As s i gnment to s tates 3,478 3,518 2,959 3,019 2,595

Di rect ta x 6,654 6,709 5,685 5,676 4,967


7/27

5 662 5 209

Th i f hi h b i i b b k/ it hi ( t ~INR500b ) hi h ill b i d

Borrowingcould exceed by~INR200bn

Funding the FiscFY14 (Edel) FY14 (BE) FY13 (RE)

Gros s ma rket borrowi ng

6,527

6,290

5,580

Net short term (Tbi l l )Sma l l sa vi ngs scheme

19858

19858

45786

Fi s ca l defi ci t 5,662 5,425 5,209RE: Revised Estimates BE: Budget EstimatesSource: Budget documents, Edelweiss research

Net budgeted market borrowing of INR 4.8tn (vs INR 4.67 in FY13) was inline with the market expectationHowever, gross borrowing came much higher than the expectations of ~INR 5.75tn

The main reason for higher gross borrowing is buyback/switching (extra ~INR500bn) which will be carriedthis year for better debt management.

7

Others 329 329 (8)

Net ma rket borrowi ng 5,077 4,840 4,674


8/27

G % f GDP F

Comparison to precrisisperiod

Revenues still long way to go Expenditure reined back close to precrisis levels

17.013.5

6.0 10.0

Gross tax as % of GDP Total expenditure as % of GDPSource: CMIE, Edelweiss research

8

(as%ofGDP)

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14(Edel)

(as%ofGDP)

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14(Edel)

15.6

14.2

12.8

11.4

12.0

10.5

9.0

7.5


9/27

FY13 : Significant consolidation in 2H

In 2H FY13 government undertook aggressive fiscal consolidation to achieve gross fiscal deficit of ~5.2% ofGDP in FY13 (vs Budgeted ~5.1% of GDP).

The consolidation was undertaken mainly via reductions in expenditure (especially plan expenditure).

Deficit as % of budgeted fiscal deficit130

10

Source: CMIE, Edelweiss research

9

(Fiscaldeficitas%ofBudgetedfiscal

deficit)

Apr.

May

Jun.

Jul.

Aug.

Sept.

Oct.

Nov.

Dec.

Mar.

106

82

58

34

FY13 FY12


10/27

Sector-wiseAnnouncements

10


11/27

by hi l l sta tes )

Automobiles

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyAuto Reli ef in exci s e duty. Not l i kel y. I ncrea s e in exci s e duty to 30% on non

ta xi SUVs in 27% bra cket.

Ma rgi na l n ega ti ve for M&M as weexpect the addi ti onal l evi es to be

pa s s ed on to the cus tomer.

Benefi ts in ta x and R&D expendi ture to el ectri cvehi cl es .

Li kel y. No a nnouncement. Ma rgi na l nega ti ve for M&M.

To increa s e ta x ra te on p a yments ofroya l ty/techni ca l fees to non

res i dents from 10% to 25%.

Neutra l for Ma ruti as appl i cabl e ra tewi l l be the ra te of ta x stipul a ted in the

DTAA (10% between Indi a and Ja pa n).

Cus tom duty hi ked from 60% to 75%on bi kes above 800cc engi ne ca pa ci ty.

Neutra l .

11

Exci s e duty on truck cha s s i s reduced Neuta l .

from 14% to 13%.

Cus tom duty hi ke from 75% to 100% Neutra l .

on luxury ca rs (CI F va l ue above USD40k).

To provi de INR149bn for JNNURM (to Pos i ti ve for As hok Leyl a nd, Ta ta

purcha s e upto 10k buses, es peci a lly Motors , Ei cher Motors .

by hi l l sta tes ).

Cl a ri ty on di es el pa s s enger vehi cl e ta xa ti on. Di es el ta x on hi gher ca pa ci ty SUVs No a nnouncement. Pos i ti ve for M&M.wa s expected


12/27

d i t t R 25 000 f 10 000 t

BFSI

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyBFSI Ba nk's l ending to power sector Sectora l expos ure li mi t for ba nks in

ca s e of lending to power sector ca n be

rel a xed to fa ci l i ta te fres h l ending.

Long term ba s e ra t e to be introduced

for i nfra s tructure proj ects whi ch

shoul d be delinked from ba nk ba s e

ra tes in order to provi de sta bl e

interes t cha rges for proj ects

Commodi ti es Tra ns a cti on Ta x Levy of CTT on commodi ty tra di ng Propos a l to introduce Commodi ti es Tra ns a cti on ta x (CTT) in a li mi ted wa

y.

0.01% of the va l ue of the contra ct

i mpl emented

Nega ti ve for MCX as it i mpa cts thej obbi ng vol umes and increa s es cos t of

tra di ng on MCX vi s vi s interna ti ona

l

excha nges . However, on the pos i ti ve si

de wi th the i ntroducti on of CTT, thebi l l now al so s pecifi es tha tcommodi ti es tra di ng wi l l not be cons

i

dered a specul a ti ve tra ns a cti on and

hence CTT pa i d by the a s s ess ee al

ong

wi th los s es incurred, if any ca n now

be adj us ted agai ns t otherbus i nes s income thereby lea ding to ta x

benefi ts .

12

Ta x sops on fi xed depos i ts Increa s i ng the TDS li mi t on fi xed

depos it to Rs 25,000 from 10,000 a t

pres ent.

Ta x brea k on l onger tenor to provi de

some rel i ef to ALM: Cons idering low

depos i t mobi liza tion and l ending s

kewed towa rds longer tenor as s ets


13/27

h INR2 5 ) i d i FY14

BFSIcontd.

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/company

Addi ti ona l d educti on of interes t uptoINR0.1mn for fi rs t home loa n (of les s

that INR2.5mn) sancti oned i n FY14. Va lue of property to be l es s tha n INR 4 mn

Pos i ti ve for home loa n fi na nci ers in

the ca tegory of INR2.5mn and bel ow,

na mel y LI CHF, Dewa n Hous i ng, GruhFi

na nce. SBI too sta nds to benefi t to a li

mi ted extent on the home loa ns portfol

i o.

I nfra s tructure ta xfree bonds ofINR500bn ca n be iss ued in FY14

Though the el i gi bl e li mit of INR500bnis lower tha n the INR600bn of la s t fi s

ca l , gi ven tha t onl y I NR250bn is li kel

y

to be mobi l i zed under thi s hea dof the tota l li mi t the reducti on inovera l l li mi t is unlikel y to ha ve any

impa ct

13

FIIs to be permi t ted to tra de currency Pos i ti ve for MCSSX, however the li mi t

deri va ti ves on excha nge to the extent to the extent of thei r expos ure onl y

of thei r Indi a n rupee expos ure in li mi ts the overa l l vol ume expa ns i on

I ndi a

BFSI Interes t s ubventi on scheme for ST Pos i ti ve for pri va te ba nks as they too

crop loa ns to be conti nued and to be ca n offer the lucra ti ve scheme to

extended to Pri va te SCBs as wel l . fa rmers . A bri ef des cri pti on of the

schemeUnder thi s loa ns are provi dedby ba nks to fa rmers at 9% and if the

repa yment is done wi thi n the agreed ti

me fra me, the fa rmer ends up pa yi ng

onl y 4% RoI whi l e the ba nk ca n cl a i m

another 5% from the government vi a

RBI . Whi l e now pri va te ba nks too ca n

offer thi s scheme we bel i eve they are

under no compul s i on to do so.


14/27

Capital Goods

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyCa pi ta lGoods

Increa s ed al l oca ti on to s trenghtheni ng T&Dnetwork to cut AT&C los s es

Increa s ed a lloca ti on tos trenghtheni ng T&D network to cut

AT&C los s es

No a nnoucement Nega ti ve

Ta x on roya l ty pa yments by Indi a ns ubs idia ry hi ked to 25% from 10%

Ma rgina l ly nega ti ve for Cummi nsIndi a

Expendi ture in defence (I NR 867bn ,& Toubro

14

Increa s ed a l l oca ti on of Ca pi ta lPos i ti ve Bha rat El ectrnoi cs a nd La rs en

25% YoY growth) in FY14E

Inves tment Al l owa nce @15% on Pos i ti ve for Ca pi ta l equi pmentinves tments in new Pl a nt & compa ni es li ke Therma x, Cummi ns ,

Ma chi nery worth INR 1bn and above ABB, Si emens , etc.


15/27

Cement

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyCement Reducti on in exci s e duty on cement and

s i mplifica tion of the duty structure to s pecific ra

te per MT agai ns t the current compl ex structure

of cha rgi ng it on adva l orem cum speci fic dutyba s i s and further rel a ti ng it to the

No cha nge. No cha nge.

Cl a s s i fy cement as 'Decl a red Goods ' under Secti on 14 of the Centra l Sa l es ta x Act to put it

on equa l footi ng wi th other core sector goods

like coa l and steel .

No cha nge. No cha nge.

2% and CVD by 1%. INR0.30.8 ra nge per ba g of cement.

No i ncrementa l i mpa ct on ACC and

Ta x on roya l ty pa yments h i ked to 25%from 10%.

Ambuj a Cement as Indi a ha s DTAA wi thSwi tzerl a nd ca ppi ng the ta x at 10%.

15

Cus toms duty on s tea m coa l hi ked by The i mpa ct will be ma rgi na l in the

Abol i ti on of import duty on pet coke and levy of No cha nge. No cha nge.

cus toms duty on cement i mports .


16/27

exci s e ri s e to ma inta in EBI T ma rgi n at

i (HUL C l ) d DTAA

Consumer Goods

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyCons umerGoods

Rura l i ni tia ti ves on i ncome genera ti on. We expected thi s to conti nue, thoughgrowth coul d modera te.

Contri buti on to MNREGA schemema inta ined at I NR330bn (no increa s

e), in li ne wi th expecta ti ons .

Rura l growth ha s been growi ng aheadof urba n growth whi ch is li kely to conti

nue.

An upwa rd revi s i on in the income ta x exempti onli mi t.

We expected an increa se as it woul dbe a step towa rds di rect tax code.

Ta x credi t of INR2,000 for income upto I NR500,000 (l ea di ng to effecti ve

exempti on of I NR220,000 for i ndi vi

dua l s wi th income l es s tha n I

NR500,000).

We expect thi s step to ma rgina l l yincrea s e di s pos abl e income of the

urba n poor/urba n mi ddl e cl a s s whi

ch will hel p boos t Cons umer s pendi ng

to some extent.

16

Ra te of tax incr ea s ed from 10% to 25% No s i gnifi ca nt impa ct on mos t

on royal ti es and techni ca l fees pa id compa ni es (HUL, Col ga te) due to DTAA

to nonres i dent. Thi s wi l l be effecti ve ra te overri di ng the enha nced ra te.

as per government note from Apri l 1, Si nce it is a ppl i ca bl e from FY15 there

2014 (i .e. FY15). is no nea r term impa ct.

No increa s e in exci s e duty on ci ga rettes . I ncrea s e in exerci s e duty by 8 Exci s e on ci ga rettes increa sed 18% on The hi ke is s entimenta lly nega ti ve for

10% for ci ga rettes wa s expected. al l segments except bel ow 65mm. al l ci ga rette compa ni es , es peci ally the sma l ler pl a yers as thi s is second yea r of

ha rs h Budget for ci ga rettes . ITC will need to hi ke pri ce ~13% to offs et thi s exci s e ri s e to ma inta in EBI T ma rgi n at the current 32.3%; ITC's strong pricing power wi l l ha ve l i ttl e

impact on vol umes , though no cha nge in sub

65mm ca tegory wi l l prop vol umes .


17/27

Construction

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyCons tructi on Steps to lower borrowi ng cos ts by a llowi ng

refi na nci ng of INR term loa ns through ECBs .

Unlikel y. No a nnouncement. Neutra l .

3,000 km of roa d proj ects will beawarded in the fi rs t si x months of

201314.

Pos i ti ve for the se ctor as it will

increa se order fl ow.

17

Government will cons ti tute a Pos i ti ve as it will increa s e

regul a tory authori ty for the roa d a ccounta bil ity and tra ns pa rency in the

sector. system.


18/27

j i i t N MAT

IT

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyIT MAT on SEZ income to be wi thdra wn as it is

counter to the longterm pol i cy a nnounced by

the Government through the SEZ Act. Al terna ti vel

y, MAT shoul d be wi thdra wn at l ea s t in res pectof SEZs whi ch ha ve al rea dy been noti fi ed so tha t

economi c vi a bil ity of thes e SEZs is protected

Di d not expect to occur No a nnouncement

Increa s e in s urcha rge to res ul t in

1.3% average ta x increa s e as some

porti on of the income is on MAT and

ma j oii ty on Non MAT.

Ma rgina l ly nega ti ve i mpa ct

18

Deni a l of ta x deducti ons for ons i te The expecta ti on wa s tha t ons i te No a nnouncement

s ervices .With the suns et of STP benefi ts , there s ervi ces will be trea ted as exports of

ha s been deni a l of ta x deducti ons for ons i te s ervi ces and not as export of

s ervi ces on one pretext or the other, whi ch the ma npower

exporters of IT s ervi ces are enti tl ed to.


19/27

RBNL Al li htl iti f

Media

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyMedi a Subs umpti on of servi ce ta x and enterta i nment ta x

in GST.

Unlikel y as it al s o depends on thei mpl ementa ti on of GST whi ch ha

s been pendi ng for a few yea rs .

No announcement No impa ct

FM Pha s e 3 aucti ons wi l l be conducted i n FY14. 294 ci ti es

(popul a ti on > 0.1mn) will ha ve 839

FM sta tions .

Pos i ti ve for ENI L, Next Medi aworks andRBNL. Al so, s li ghtl y pos iti ve for compa

ni es like Sun TV, DB Corp and HT Medi a

whi ch have sma l l FM ra di o operati ons

as a % of tota l sal es.

19

Temporary tra ns fer or permi tti ng the Li kel y nega ti ve for broa dca s ters as us

e or enj oyment of a copyri ght movi e a cqui s i ti on cos ts mi ght increa s

e rel a ti ng to ci nema togra phi c fil ms was due to hi gher s erviceta x. Li kel y mi nor ful l y exempt from servi ce ta x; now, nega ti ve for DTH/ca

bl e opera tors who thi s exempti on wi l l be res tri cted to provi de pa yper vi

ew fa cili ty.

exhi bi ti on of ci nema togra ph fi l ms in

movi e thea tres .

Reducti on of cus toms duty on di gita l hea d ends Unlikel y as it will put a ddi ti ona l Cus toms duty on s et top boxes Thi s will be a negati ve (~I NR65 impact)and s et top boxes . burden on the government and increa s ed from 5% to 10% to promote for cabl e and DTH compa ni es as di s

coura ge domes ti c producti on of domes ti c producti on of set top boxes . al mos t al l set top boxes are imported. STBs .

We expect al l compa ni es to pa s s thi s

hi ke to cons umers .


20/27

Metals & Mining

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyMeta l sand

Mi ni ng

Steel increa s e in i mport duty to 10% from 7.5% Low proba bi li ty No cha nge None

I mpl ementa ti on of zero import du ty on importof certa i n gra des of coa l

Li kel y I mport duty on al l therma l coa lgra des at 2%

Senti menta ll y pos i ti ve for Coa l I ndi a

Increa s e in cus toms duty for a l uminium from5% to 10%

Unl i kel y No cha nge None

20

Iron ore reducti on in export duty (currentl y Unl i kel y No cha nge None

30%)

Impos i ti on of 4% exci s e duty on si lver Nega ti ve for HZL and Sterl i te

produced from zi nc/l ea d ore

Remova l of steel imports from free tra de Unl i kel y. Mea s ure al s o requi res No cha nge Nonea greements (FTA) concurrence of forei gn countri es


21/27

No cha nges

compa ni es (IOCL BPCL HPCL MRPL RI L)

Sha l e ga s pol i cy to be a nnounced

l ti /d l t f NELP

Oil & Gas

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyOi l & Ga s Remova l of Na ti onal Ca l a mi ty Conti ngent Duty on

Crude Oi l l evi ed @ Rs .50/MT.

We di d not expect any cha nges on thesa me.

No a nnouncement

Decl a red Goods sta tus to Na tura l Ga s and LNG No cha nges No a nnouncement

Extens i on of 7 yea r ta x hol i da y on refi neri es from March 2012 to Ma rch 2017

No cha nges No a nnouncement

I ncl ude petrol eum products in GST, whi l e addres s i ngthe concern of sta tes through levy of an a ddi ti ona l

ta x

No cha nges No a nnouncement

PSC for NELP bl ocks wi l l in future bemoved from profi t petrol eum sha ri ng

to revenue shari ng model

Sha l e ga s pol i cy to be a nnounced

s oon

Natura l ga s pricing pol i cy wi l l be

revi ewed s oon

Ca bi net Commi ttee on Inves tment

(CCI) wi l l meet to cl ear hurdl es in expl

ora ti on/devel opment of NELP bl ocks

Revenue sha ring model wi l l ea s e theca pex approval proces s . If the Ra ngaraj an

Pa nel recommenda ti ons on na tura l ga s pri

ci ng are a pproved, it wi l l be a pos i ti ve for

RI L and ONGC. Any a pprova l s by CCI for

NELP bl ocks wi l l lea d to expl ora ti on acti vi

ti es pi cki ng up

21

Inves tment al l owa nce of 15% on new The sa me is pos i ti ve for sector but more pl

a nt & ma chi nery a cqui red and for RI L. RI L ha s pl a nned $12bn ca pex insta l

led in FY14 and FY15, and worth and mos t of the same is expected to be INR

1bn and above commerci a l 2015 end.

None I mport duti es on crude to increa s e No a nnouncement No cha nges . Thi s is pos i ti ve for refi ni ng from 0% to

2.5%. Al s o increa s es compa ni es (IOCL, BPCL, HPCL, MRPL, RI L) import duti es on al l

products by 2.5% as the current duty di fferenti a l of ~2% is except di es el , LPG, Keros enema inta ined

100% Depreci a ti on on Fuel qua l i ty upgradati on No cha nges No a nnouncement

proj ects

Extens i on of 'Infra s tructure Sta tus ' to 'Ga s proj ects ' No cha nges No a nnouncement such as LNG termi na l s for the purpos e of 10yea r ta x

hol i da y under Secti on 80IA

Extens i on of 100% Exci s e Duty Concess ion to North Shoul d happen, ma ybe pa rti a l say No a nnouncement

Ea s t Refi neri es . 50% or 75%


22/27

N i l H l h Mi i i d

benefi t as mos t compa ni es pa y ta x at

Pharma

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyPha rma Rolli ng out of uni vers a l a cces s progra m me to

es s enti a l medi ci nes wi th an outl a y of

INR5,000

6,000 crores p.a . (0.1% of GDP).

Importa nt to see if pri va te s ectorpl a yers wi l l be part of the

procurement for a cces s to es s enti a

lmedi ci nes .

Hea l thca re expendi ture increa s edfrom INR30,000 crores to

INR37,330crores (i ncrea s e of 24%);

overa l l , the expendi ture under Nationa l Hea l th Mi ss i on i ncrea s ed to

Pos i ti ve as it increa s es the rea ch formedi ci nes thereby improving penetra

ti on l evels in both urba n and rura l

area s .

INR21,200 crores and will i ncl ude both rura l and propos ed urba n

mi s s i on.

Revi s i t the MAT currentl y bei ng l evi ed on SEZs ,gi ven indus try ha s hi gh inves tment in SEZs .

Increa s e in s urcha rge from 5% to 10%;inves tment a llowa nce of 15% over

current depreci a ti on on ca pex of

INR100 crores and more on P&M.

a) Nega ti ve impa ct of 0.4% increa s e in

MAT ra te to an extent tha t domes ti c

a ccounts for 40% of tota l bus i nes s .

b) Inves tment a llowa nce does notbenefi t as mos t compa ni es pa y ta x at

MAT.

Hea l thca re(hos pi ta l s

)

Increa s e in exempti on limi t u nder Secti on 80Dfor hea l th ins ura nce.

Li kel y. More ins ura nce penetra ti on in Ti er IIci ti es wi thout pri or approval of IRDA

Improve a fforda bi lity for qua l i tyhea l thca re in thes e towns tha t are

and hea l th cover under soci a lsecuri ty packa ge for unorga ni zed

sector.

ta rget area s for growth by speci a l tyhos pi ta l s .

Increa s e in s urcha rge from 5% to 10%. Nega ti ve i mpa ct wi th increa s e i n ta xra te by 1% as mos t profi t comes fromdomes ti c busi ness.

22

Pri ori ty s ector sta tus to hea l thca re incl uding

hos pi ta l s and di a gnos ti cs .

Remove exci s e duty di s pa ri ty between API and We expected thi s in order to reduce No cha nge in the duty structure.

formul a ti ons . di s pa ri ty in the MODVAT structure.

Increa s e wei ghted deducti on on R&D to 300% No a nnouncement.

from current 200%.


23/27

U b h i f d b b

RealEstate

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyRea lEs ta te

Gi ve i nfra s tructure sta tus to a fforda bl e hous i ngs egment.

Li kel y Current sops for affordabl e hous i ngto conti nue.

No Impa ct

Increa s e in exempti on li mi t on interes tpa yments on morta ges .

Not likel y Addi tiona l interest deducti on ofI NR100,000 for hous i ng loa ns up to

INR2.5mn ta ken for fi rs t home from

the peri od 1.4.13 to 31.3.14.

Pos i ti ve for Ja yp ee Infra tech (BUY) andPura va ka nka ra Proj ects (Unra ted).

Other li s ted compa ni es do not ha ve a

si gni fi ca nt pres ence in


24/27

Power & Infrastructure

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyPower 2% cus toms duty i mpos ed on therma l

coa l imports (ea rl i er nil) & CVD

increa s ed to 2% from ea rli er 1%.

PPAs ha ve a cl a us e to pa s s on suchincrea s e in cos t to procurers . However,

thi s is nega ti ve for devel opers ha vi ng

mercha nt contra cts . Nega ti ve for JSWEnergy and PTC Indi a .

24

Sec 80 IA benefi ts extended and DDT Pos i ti ve on expected lines

exempted for di vi dend from forei gn

compa ni es by another yea r


25/27

of PAN numbers for hi gh va l ue

coul d be a step towa rds di rect ta x increa s e di s pos a bl e income of the

Retail

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyReta il Cl a rity on nua nces of norms (s ourci ng, ba ck

end inves tment, etc.) for FDI in mul ti bra nd

reta i l .

Mi rrori ng proa cti venes s in promoti onof FDI in si ngl ebra nd reta i l , we

expected government to provi de

cl a ri ty on norms on FDI in mul ti

No a nnounc ement. Confus i on pers i s ts rega rdi ng FDInorms ; wi l l conti nue to awa i t cl a ri

ty.

An upwa rd revi s i on in the income ta x exempti onli mi t.

We ha d expected an increa s e as it

coul d be a step towa rds di rect ta x

code.

Ta x credi t of INR2,000 for income upto INR500,000 (l ea di ng to effecti ve

exempti on of I NR220,000 for

We expect thi s reforms to ma rgina lly

increa s e di s pos a bl e income of the

urba n poor/urba n mi ddl e cl a s s whi

ch

GST roa dma p la i d down Thi s is a cl ea r pos i ti ve for Reta i lpl a yers .

25

Servi ce ta x will be levi a ble on ta xa bl e Thi s will be nega ti ve for QSRs and fi ne

s ervi ce provi ded in res ta ura nts wi th di ni ng wi th ai rcondi tioni ng ai rcondi ti

oni ng or centra l ai r hea ti ng

in any pa rt of the es ta bl i s hment at

any ti me duri ng the yea r.

To further reduce centra l exci s e duty on We ha d belived thi s wa s unlikel y due Zero exci s e duty route', as exi s ted Thi s is cl ea rl y pos i ti ve for bra nded bra

nded cl othes (effecti ve exci s e duty reduced to ba l l ooni ng fi s ca l defi ci t and the pri or to Budget 201112, is bei ng ga rment pl a yers and al s o reta i l ers li ke

by 90bps from 4.5% on 3.6% on appa rel reta i l fa ct tha t there wa s cut initi a ted in the res tored in res pect of bra nded Pa nta l oons and Shoppers Stop

pri ce in the la s t budget). la s t budget. rea dyma de garments and ma de ups.

No further regul a ti ons to curb gol d dema nd; in We ha d not rul ed out stri cter No cha nges a nnounced. Pos i ti ve for bra nded jewel l ers who

Ja nua ry 2013, government ha d hi ked i mport regul a ti ons li ke reducti on of credi t were fea ri ng stri cter rul es

duty on gol d from 4% to 6%. peri od by domes ti c ba nks provi ded to

j ewel l ers (from current 180 da ys credi

t to 90 da ys ), ma nda tory quoti ng of

PAN numbers for hi gh va l ue purcha s es

and to i ntroduce gol d li nked fi na nci a l

ins truments to di vert sa vi ngs from

phys i ca l gol d to bonds .


26/27

Telecom

Sector Industry/market wishlist Edelweiss expectations Announcements in Budget Impact on sector/companyTel ecom Increa s e in s urcha rge to res ul t in

1.6% average ta x increa s e.

Ma rgina l ly nega ti ve i mpa ct

26


27/27

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