Union Budget Review

1
Union Budget 2013-14 (First cut)
Credible and balanced budget Edelweiss
Research February 2013
2
Union Budget FY14 Highlights
Fiscal math largely credible. Revenue slightly
aggressive, but expenditure and subsidies well
provided for. Consolidation process continues.
Fiscal deficit for FY14 budgeted at 4.8 of GDP
(our estimate 5.0 of GDP).
Budgeted net borrowing is at INR 4.8tn. We
believe it could be a bit higher by INR200bn.
However, gross borrowing came higher than
expected as government intends to rebalance the
maturity profile of debt.
Budget was growth supportive as it intended to
support investments through extra tax exemptions
for investment in plant and machinery. Further,
it substantially raised the limits of tax-free
infra bonds. Some attempt has been made to boost
financial savings by liberalising coverage of
Rajiv Gandhi Equity
Scheme (RGES) and insurance sector. Further, the
finance minister announced that inflation indexed
bonds will be introduced possibly with the intent
to curb gold imports. While the finance minister
cited CAD as a big worry, no export boosting
measures were announced.
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
RIL Housing finance companies namely LIC Housing
Finance, Gruh Finance and Dewan Housing Bus
manufacturers namely Ashok Leyland, Tata Motors
and Eicher Motors Affordable housing developers
namely Jaypee Infratech Puravakankara Projects
2
3
Fiscal math looks largely credible
Fiscal math largely credible y 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 aggressive y 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 non-tax revenues side as well, we think FM
has been a bit aggressive, particularly with
regards to telecom revenues . Expenditure does
not seem to be under-budgeted 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 diesel price
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.
FY14 S f hi i l d b i l i i l d l di
3
4
Minor changes in taxes
Slight changes in direct and indirect taxes
y 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 time-frame for implementation
mentioned. However, FM mentioned that significant
progress has been made and he hoped to introduce
constitutional amendment and draft bill in GST in
coming months.
4
5
Few positive announcements
Positive for investment
y
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.
y
T f i f b d t i f INR250b t INR500b
y
Road regulator to iron out issues in the sector.
Incentives to boost financial savings
y 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.
Others
y
Additional tax deduction for first time house
buyer (loan up to INR 2.5 million)
5
6
Fiscal
deficit likely to be
5 of GDP
in FY14
Fiscal Deficit FY14 at 5.0 of GDP
(INR bn)
Particulars
FY14 (Edel)
FY14 (BE)
FY13 (RE)
FY13 (BE)
FY12 (Actual)
Ta x revenue (net)
8,741
8,841
7,421
7,711
6,297
- Di rect ta x 6,654 6,709 5,685 5,676 4,967
- Indi rect ta x
5,565
5,650
4,695
5,054
3,924
Les s As s i gnment to s tates 3,478 3,518 2,959
3,019 2,595
Non-ta x revenue recei pts
1,624
1,723
1,297
1,646
1,217
of which telecom 3G 300 408 194 580 174
Capi tal recei pts
605
665
381
417
369
of which disinvestment 400 400 240 300 181
TOTAL RECEIPTS
10,970
11,228
9,099
9,774
7,883
Non-pl an expendi ture
11,078
11,100
10,016
9,699
8,920
a) Total subsidy 2,360 2,311 2,577 1,900 2,179
- Food subsidy
950
900
850
750
728
- Fertilizer subsidy 660 660 660 610 700
- Oil Subsidy
650
650
969
436
685
- Interest and others subsidy 100 101 98 104 66
b) Interes t payments
3,707
3,707
3,167
3,198
2,732
c) Other revenue expendi ture 3,911 3,911 3,454 3,
557 3,210
3 911 3 454 3 210
d) Ca pi ta l expendi ture
1,100
1,171
819
1,043
799
Pl a n expendi ture 5,553 5,553 4,292 5,210 4,266
- Revenue
4,433
4,433
3,434
4,205
3,337
- Capital 1,121 1,121 858 1,005 786
TOTAL EXPENDITURE
16,631
16,653
14,308
14,909
13,186
16 631 14 308 13 186
Fiscal deficit
5,662
5,425
5,209
5,135
5,303
Revenue defcit 4,046 3,798 3,912 3,503 3,944
Revenue defi ci t/GDP (i n )
3.6
3.3
3.9
3.4
4.4
Fi s ca l defi ci t/GDP (i n ) 5.0 4.8 5.2 5.1 5.
9
5 0 5 2 5 9
RE Revised Estimates
BE Budget Estimates
Source Budget documents, Edelweiss research
6
7
Borrowing
could exceed by
INR
200bn
Funding the Fisc
FY14 (Edel)
FY14 (BE)
FY13 (RE)
Gros s ma rket borrowi ng
6,527
6,290
5,580
- Net ma rket borrowi ng 5,077 4,840 4,674
Net short term (T-bi l l ) Sma l l sa vi ngs
scheme
198 58
198 58
457 86
Others 329 329 (8)
Fi s ca l defi ci t
5,662
5,425
5,209
5 662 5 209
RE Revised Estimates
BE Budget Estimates
Source Budget documents, Edelweiss research
Net budgeted market borrowing of INR 4.8tn (vs
INR 4.67 in FY13) was inline with the market
expectation However, gross borrowing came much
higher than the expectations of INR 5.75tn
The main reason for higher gross borrowing is
buyback/switching (extra INR500bn)
which will be carried
Th i f hi h b i i b b k/ it hi ( t INR500b
) hi h ill b i d
this year for better debt management.
7
8
Comparison to pre-crisis
period
Revenues still long way to go
Expenditure reined back close to pre-crisis levels
17.0
13.5
15.6
12.0
14.2 12.8 11.4
10.5 9.0 7.5
(as of GDP)
(as of GDP)
10.0
6.0
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14(Edel)
FY14(Edel)
Gross tax as of GDP
Total expenditure as of GDP
G f GDP F
Source CMIE, Edelweiss research
8
9
FY13 Significant consolidation in 2H
In 2H FY13 government undertook aggressive fiscal
consolidation to achieve gross fiscal deficit of
5.2 of GDP in FY13 (vs Budgeted 5.1 of
GDP). The consolidation was undertaken mainly via
reductions in expenditure (especially plan
expenditure).
Deficit as of budgeted fiscal deficit
130
106 82 58
(Fiscal deficit as of Budgeted fiscal deficit)
34
10
Jul.
Apr.
Jun.
Oct.
May
Aug.
Nov.
Dec.
Mar.
Sept.
FY13 FY12
Source CMIE, Edelweiss research
9
10
Sector-wise
Announcements
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11
Automobiles
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Auto
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 nega ti ve for MM as we expect the
addi ti onal l evi es to be pa s s ed on to the
cus tomer.
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 MM. wa
s expected
Benefi ts in ta x and RD expendi ture to el
ectri c vehi cl es .
Li kel y.
No a nnouncement.
Ma rgi na l nega ti ve for MM.
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 ).
by hi l l sta tes )
To increa s e ta x ra te on pa yments of roya 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 te wi 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 ke from 75 to 100 Neutra l .
on luxury ca rs (CI F va l ue above USD40k).
Cus tom duty hi ked from 60 to 75 on bi kes
above 800cc engi ne ca pa ci ty.
Neutra l .
Exci s e duty on truck cha s s i s reduced Neuta
l . from 14 to 13.
11
12
BFSI
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
BFSI
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 te 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
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
longer 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
d i t t R 25 000 f 10 000 t
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 the j obbi ng
vol umes and increa s es cos t of tra di ng on
MCX vi s -à -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, the
bi l l now al so s pecifi es tha t commodi 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 other
bus i nes s income thereby lea ding to ta
x benefi ts .
12
13
BFSI-contd.
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
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 scheme-Under thi s loa ns are provi ded by
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.
Addi ti ona l deducti on of interes t
upto INR0.1mn for fi rs t home loa n (of les s
that INR2.5mn) sancti oned i n FY14. Va l ue 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, Gruh Fi na nce. SBI too
sta nds to benefi t to a li mi ted extent on the
home loa ns portfol i o.
h INR2 5 ) i d i FY14
FIIs to be permi tted to tra de currency Pos i
ti ve for MCS-SX, 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
I nfra s tructure ta x-free bonds of INR500bn ca
n be iss ued in FY14
Though the el i gi bl e li mit of INR500bn is
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 d
of the tota l li mi t the reducti on in overa l
l li mi t is unlikel y to ha ve any impa ct
13
14
Capital Goods
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Ca pi ta l Goods
Increa s ed al l oca ti on to s trenghtheni ng
TD network to cut ATC los s es
Increa s ed a lloca ti on to s trenghtheni ng TD
network to cut ATC los s es
No a nnoucement
Nega ti ve
Inves tment Al l owa nce _at_15 on Pos i ti ve
for Ca pi ta l equi pment inves 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.
Ta x on roya l ty pa yments by Indi a n s ubs
idia ry hi ked to 25 from 10
Ma rgina l ly nega ti ve for Cummi ns Indi a
Increa s ed al l oca ti on of Ca pi ta l Pos i
ti ve Bharat El ectrnoi cs a nd La rs en 25 YoY
growth) in FY14E
Expendi ture in defence (I NR 867bn ,
Toubro
14
15
Cement
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Cement
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 ad-va l orem cum
speci fic duty ba s i s and further rel a ti ng
it to the
No cha nge.
No cha nge.
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 .
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.
Cus toms duty on stea m coa l hi ked by The i
mpa ct will be ma rgi na l in the
2 and CVD by 1.
INR0.3-0.8 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 hi ked to 25 from
10.
Ambuj a Cement as Indi a ha s DTAA wi th Swi
tzerl a nd ca ppi ng the ta x at 10.
15
16
Consumer Goods
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Cons umer Goods
Rura l ini tia ti ves on income genera ti on.
We expected thi s to conti nue, though growth
coul d modera te.
Contri buti on to MNREGA scheme ma 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 ahead of urba n
growth whi ch is li kely to conti nue.
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 .
exci s e ri s e to ma inta in EBI T ma rgi n at
An upwa rd revi s i on in the income ta x exempti
on li mi t.
We expected an increa se as it woul d be a step
towa rds di rect tax code.
Ta x credi t of INR2,000 for income up to 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 y increa 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.
Ra te of tax increa s ed from 10 to 25 No s i
gnifica 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 non-res i dent. Thi s wi l l
be effecti ve ra te over-ri di ng the enha nced
rate. 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.
i (HUL C l ) d DTAA
16
17
Construction
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Cons 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 .
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.
3,000 km of roa d proj ects will be awarded in
the fi rs t si x months of 2013-14.
Pos i ti ve for the sector as it will increa se
order fl ow.
17
18
IT
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
IT
MAT on SEZ income to be wi thdra wn as it is
counter to the long-term 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 pect of 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
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.
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
j i i t N MAT
18
19
Media
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Medi 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 the i mpl
ementa ti on of GST whi ch ha s been pendi ng for
a few yea rs .
No announcement
No impa ct
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 .
FM Pha s e 3 aucti ons wi l l be conducted i n
FY14. 294 ci ti es (popul a ti on gt 0.1mn) will
ha ve 839 FM sta tions .
Pos i ti ve for ENI L, Next Medi aworks and RBNL.
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.
RBNL Al li htl iti f
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 ervice
ta 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 y-per vi ew fa cili ty. exhi bi
ti on of ci nema togra ph fi l ms in movi e thea
tres .
19
20
Metals Mining
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Meta l s and 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
Remova l of steel imports from free tra de Unl i
kel y. Mea s ure al s o requi res No cha nge
None a greements (FTA) concurrence of forei gn
countri es
I mpl ementa ti on of zero import duty on
import of certa i n gra des of coa l
Li kel y
I mport duty on al l therma l coa l gra des at 2
Senti menta ll y pos i ti ve for Coa l I ndi a
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
Increa s e in cus toms duty for a l uminium
from 5 to 10
Unl i kel y
No cha nge
None
Iron ore - reducti on in export duty (currentl y
Unl i kel y No cha nge None 30)
20
21
Oil Gas
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Oi l Ga s
Remova l of Na ti onal Ca l a mi ty Conti ngent
Duty on Crude Oi l l evi ed _at_ Rs .50/MT.
We di d not expect any cha nges on the sa me.
No a nnouncement
Extens i on of 100 Exci s e Duty Concession to
North Shoul d happen, ma ybe pa rti a l say No
a nnouncement Ea s t Refi neri es . 50 or 75
Decl a red Goods sta tus to Na tura l Ga s and LNG
No cha nges
No a nnouncement
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 10-yea r
ta x hol i da y under Secti on 80-IA
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
100 Depreci a ti on on Fuel qua l i ty
up-gradati on No cha nges No a nnouncement
proj ects
No cha nges
I ncl ude petrol eum products in GST, whi l e
addres s i ng the concern of sta tes through levy
of an a ddi ti ona l ta x
No cha nges
No a nnouncement
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 ene


ma inta ined
compa ni es (IOCL BPCL HPCL MRPL RI L)
- PSC for NELP bl ocks wi l l in future be moved
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 the ca 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
Sha l e ga s pol i cy to be a nnounced
l ti /d l t f NELP
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.
21
22
Pharma
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Pha rma
Rolli ng out of uni vers a l a cces s progra mme
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 ector pl a yers
wi l l be part of the procurement for a cces s
to es s enti a l medi ci nes .
Hea l thca re expendi ture increa s ed from
INR30,000 crores to INR37,330crores (i ncrea s e
of 24) overa l l , the expendi ture under Nati
ona 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 for medi
ci nes thereby improving penetra ti on l evels
in both urba n and rura l area s .
N i l H l h Mi i i d
INR21,200 crores and will i ncl ude both rura l
and propos ed urba n mi s s i on.
Increa s e wei ghted deducti on on RD to 300
No a nnouncement. from current 200.
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 PM.
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 not benefi t as
mos t compa ni es pa y ta x at MAT.
benefi t as mos t compa ni es pa y ta x at
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.
Hea l thca re (hos pi ta l s )
Increa s e in exempti on limi t under Secti on
80D for hea l th ins ura nce.
Li kel y.
More ins ura nce penetra ti on in Ti er -II ci ti
es wi thout pri or approval of IRDA
Improve a fforda bi lity for qua l i ty hea l
thca re in thes e towns tha t are
and hea l th cover under soci a l securi ty packa
ge for unorga ni zed sector.
ta rget area s for growth by speci a l ty hos pi
ta l s .
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 .
Increa s e in s urcha rge from 5 to 10.
Nega ti ve i mpa ct wi th increa s e in ta x
ra te by 1 as mos t profi t comes from domes ti
c busi ness.
22
23
Real
Estate
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Rea l Es ta te
Gi ve i nfra s tructure sta tus to a fforda bl e
hous i ng s egment.
Li kel y
Current sops for affordabl e hous i ng to conti
nue.
No Impa ct
Ta x exempti ons for sma l l hous es (under-60
Li kel y No a nnouncement. No Impa ct sq.m ca
rpet area ) and speci a l hous i ng zones .
Increa s e in exempti on li mi t on interes t pa
yments on morta ges .
Not likel y
Addi tiona l interest deducti on of I 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 ypee Infra tech (BUY) and Pura
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 ltI NR3mn segment
Indus try sta tus to rea l es ta te. Not likel y
No a nnouncement. No Impa ct.
I mpl ementa ti on of REI Ts so tha t sma l l
inves tors wi l l get a cha nce to inves t in rea
l es ta te as s ets .
Not likel y
No a nnouncement.
No Impa ct.
Surcha rge on ta xes for hi gher income groups .
Li kel y Surcha rge of 10 for pers ons whos e
Mi ni ma l i mpa ct as s egment is not ta xa bl
e income exceeds INR10mn per pri ce sens i ti ve
/ does not fa ce yea r. affordabi l i ty is s
ues .
Urban hous i ng fund to be set up by NHB for I
NR20bn.
Unlikel y to i mpa ct li sted spa ce.
U b h i f d b b
TDS to be deducted at a ra te of 1 for Coul d
impa ct dema nd for rea l es ta te tra ns fer of
immova bl e property (other properti es in NCR
and pa rtia lly in tha n agri cul ture la nd),
where the Mumba i wi th a pos s ible fa l l in
cons i dera ti on exceeds INR5mn. s pecul a ti
ve tra ns a cti ons .
Hous es above 2,000 sq ft or above I NR1crore to
ha ve lower abatement of 70 agai ns t 75.
To i mpa ct cos ts by 0.6. Expected to be pa s
s ed on to end us ers . Senti menta lly nega ti
ve for DLF, Oberoi .
23
24
Power Infrastructure
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Power
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 such increa 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 JSW Energy and PTC Indi a .
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
24
25
Retail
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Reta 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 on of FDI
in si ngl e-bra nd reta i l , we expected
government to provi de cl a ri ty on norms on
FDI in mul ti -
No a nnouncement.
Confus i on pers i s ts rega rdi ng FDI norms
wi l l conti nue to awa i t cl a ri ty.
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 .
of PAN numbers for hi gh va l ue
An upwa rd revi s i on in the income ta x exempti
on li 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 up to
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
coul d be a step towa rds di rect ta x increa s
e di s pos a bl e income of the
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
2011-12, 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.
GST roa dma p la i d down
Thi s is a cl ea r pos i ti ve for Reta i l pl a
yers .
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 r-condi tioni ng ai r-condi 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.
25
26
Telecom
Sector
Industry/market wishlist
Edelweiss expectations
Announcements in Budget
Impact on sector/company
Tel 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
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