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Sensex 17,198.26 +0.39%
Nov 25, 03:30
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Sensex Budget
For the premier Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called "The Stock Exchange, Mumbai" by paying a princely amount of Re1.
Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market.
SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media.
The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX.
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Auto 7,091.88 +0.51%
Nov 25, 15:29
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Automobile Budget
Post-budget analysis
What the Budget does
Reduction in excise duties from 16% to 12% on manufacturing of 2&3 wheelers, buses and small cars
Agricultural credit outlay increased to Rs 2,80,000 crore
10% increase in defence sector allocation to Rs 1,05,600 crore
Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary
Higher allocation towards road development programme such as the NHDP.
Impact on sector
Excise duty reductions will help lower prices and stimulate demand for 2&3 wheelers and small cars
Increased demand for new buses from STUs (State Transport Undertakings) as well as private players
Higher defence allocation will spur investment in new vehicles
Higher agricultural credit outlay will help boost demand for tractors
Increased thrust on road infrastructure is a positive for all the automobile manufacturers especially passenger vehicles and CVs
Impact on companies
2&3 wheeler makers like Hero Honda, Bajaj and TVS Motors to benefit from reduction in excise duties
Small car players like Tata Motors and Maruti will reap the benefit from small cars excise duty reductions
Ashok Leyland and Tata Motors, the leading bus manufacturers will benefit from excise duty reductions on buses
Suppliers to the defence sector like M&M and Ashok Leyland to benefit from higher defence sector allocation
Increased agriculture credit outlay will benefit two-wheeler makers as well as tractor manufacturers like M&M and Punjab Tractors.
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IT 4,865.41 +0.27%
Nov 25, 15:29
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IT Budget
Post-budget analysis
As expected, the budget proved to be lack lustre for the IT sector. The status quo, pertaining to the taxation of export profits from STPI units post FY09, was maintained. The current sector valuations broadly expect a scenario of effective tax rates for large companies escalating to 18-25% in FY10, due to a gradual shift in SEZs. We believe that a wide universe of mid & small cap cos. might not be able to shift to SEZs. Policy on the FBT structure has not been tweaked significantly & corporate tax structure has been left unchanged. Hence, we continue to have a neutral view on the sector.
Customs duty on specified raw materials and inputs has been lowered while the excise duty on packaged software has been increased from 8% to 12%.
The Budget has yet again maintained its focus on education, in line with expectations, by increasing funds allocation to the sector to Rs.34,400cr up 20% from the earlier allocation of Rs. 28,674cr. The allocation for Sarva Shiksha Abhiyan (SSA) now stands at Rs. 13,100cr.
Other initiatives include provision for scholarships, extension of the Mid-day meal scheme to upper primary, and setting up of institutions for higher learning.
We believe, such education sector reforms are a positive for the sector in the long term since it is an effective way of dealing with problems like talent crunch and wage inflation.
Impact Table
| Item | Current Status | Change in Budget | Impact |
| Extension of tax benefits to IT cos. U/S 10A/10B | STP tax incentives to be discontinued post FY09 | No change | Negative for sector, but valuation have already factored in the possibility |
| Increased allocation towards education | Total allocation of Rs. 28,674 cr. | Allocating increased by Rs. 5,726 cr. | Positive for education companies catering to government schools & for the IT sector in the long term. |
Source - SBICAP Securities Limited
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Healthcare 4,744.61 -0.37%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
What the Budget does
Increase in allocation to the health sector by 15% over 2007-08.
Allocation to the National Rural Health Mission (NRHM) increased to Rs 12,050 crore.
Provision of Rs 993 crore to the National Aids Control Programme and allocation of Rs 1,042 crore for the eradication of polio with focus on high risk districts in Uttar Pradesh and Bihar.
Customs duty to be reduced from 10% to 5% on certain specified life saving drugs and on bulk drugs used for their manufacture. These drugs are also exempted from excise duty or countervailing duty.
Excise duty on all goods produced in the pharmaceutical sector reduced from 16% to 8%.
Anti-AIDS drug, 'Atazanavir', as well as bulk drugs for its manufacture to be exempted from excise duty.
In order to promote outsourcing of research, weighted deduction of 125% on any payment made to companies engaged in R&D.
Impact on sector
Increase in allocation to the healthcare sector is a positive given the need to ramp up the healthcare infrastructure in the country and improve the accessibility of quality healthcare to a larger section of the population.
Reduction of excise duty from 16% to 8% is a positive for all pharma companies enabling them to boost profitability going forward given that the excise duty is being paid on MRP.
Increased allocation of funds for eradication of HIV/AIDS and polio and reduction in customs duty on certain life saving drugs from 10% to 5% is a positive for companies having product pipeline catering to these segments.
Weighted deduction of 125% on payments made for outsourcing research services is a positive for the sector as a whole given that the emphasis on R&D has increased.
Impact on companies
Reduction of excise duty from 16% to 8% is a positive for all pharma companies namely domestic companies such as Cipla, Ranbaxy and the likes and MNC pharma companies such as GSK Pharma, Pfizer and Aventis.
Emphasis on allocating funds for the eradication of HIV/AIDS and polio is a positive for Cipla (which has a strong presence in the manufacture of anti-AIDS drugs) and Panacea Biotec (which largely manufactures oral polio vaccines).
Weighted deduction of 125% on payments made for outsourcing research services is a positive for R&D focused companies such as Ranbaxy and Nicholas Piramal.
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BSE CD 3,522.65 -0.08%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
Retail
What the Budget does
The Finance Minister has been silent on proposals for the retail industry.
Central Sales Tax rate being reduced from 3% to 2% from April 1, 2008.
Customs duty being reduced on specified machinery from 7.5% to 5% to provide fillip to the manufacture of sports goods; duty also being exempted on specified raw materials for sports goods.
Customs duty to be exempted on rough cubic zirconia and to be reduced on polished cubic zirconia from 10% to 5%, in order to encourage value addition and exports by gem and jewellery industry.
Customs duty on rough coral being reduced from 10% to 5%.
Threshold limit of exemption from personal income tax in the case of all assessees increased to Rs 150,000.
Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary.
Impact on sector
Increase in the threshold limit of exemption from personal income tax to result in a rise in disposable incomes thereby fueling growth of the retailing sector.
Impact on companies
Rise in disposable incomes due to the increase in the threshold limit of exemption from personal income tax will benefit companies like Shoppers' Stop, Pantaloon, Trent etc.
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Bankex 10,343.33 +0.60%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
Banking
The budget has come out with two proposals which could impact the banking sector in a significant manner. Removal of TDS on interest on Corporate bonds is a positive as this would make it easier for financial institutions and banks to raise funds from the bond markets. (banks raise money via bonds to meet their capital adequacy requirement).
The impact of the other measure on loan waiver to farmers is still unclear in the absence of any budgetary allocation being made for the same. While the FM has indicated that liquidity would be provided over a period of time, it is still unclear whether the government would be compensating banks for the write off of loans or only support them by way of liquidity (i.e. by lending funds which need to be repaid back by the banks over a period of time).
Capital Market
Increase in Short Term Capital Gain Tax
Short Term Capital Gain Tax increased from 10% to 15%.
Securities Transaction Tax would not be eligible for rebate. However would be an allowable expenditure while calculating Income From Business or Profession. This is a negative as earlier, STT was reduced directly from tax while now it is being reduced from the income
Impact Table
| Item | Current Status | Change in Budget | Impact |
| Scheme of Debt Waiver and Debt Relief for Farmers | No Such Scheme | Rs. 600 bn. Worth loans to be waived off to farmers | If the banks have to take the impact, it is a negative for the banks. However, the govt. has indicated at providing liquidity support. If this liquidity amounts to the govt. willing to reimburse the banks, it is a positive for the banks as some of the loans which would have gone bad would also be reimbursed by the govt. However, if such liquidity support is to be repaid by the banks to the govt., it is a negative for banks. |
| Waiver of TDS on Corporate Bonds | Interest on Corporate Bonds was subjected to TDS | No TDS on Corporate Bonds | Makes corporate bonds more attractive for investors. Companies like PFC, IDFC, REC and banks would find it easier to raise money via the bond market. |
Source - SBICAP Securities Limited
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Metal 16,231.07 +0.09%
Nov 25, 15:29
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Metal Budget
Post-budget analysis
Steel
What the Budget does
Steel melting scrap will be exempt from customs duty
Excise duty reduction in select segments of automobile manufacturing
Continuation of power sector reforms
Coal regulator to be appointed
Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary
Impact on sector
Reduction in customs duty on scrap will help steel manufacturers that use the electric arc furnace route for steel manufacturing lower their costs. On the other hand, it will be a negative for manufacturers that use the blast furnace route.
If auto manufacturers pass on the reduced excise benefits in the form of lower prices, it will help spur demand for automobiles, which in turn will drive steel demand
Increased investment in the power sector will also help boost demand for steel
The proposed coal regulator will help ease the process of allocating coal blocks, a key raw material in the steel manufacturing process
Impact on companies
Reduction in excise duties on automobiles will help companies that supply steel to auto makers. Key beneficiary would be Tata Steel
Players that supply steel to the power equipment companies like SAIL and JSW Steel will benefit from increased investments in the power sector
Better access to coal mines will be a positive for all the players that do not have their own captive mines
Aluminium
What the Budget does
Aluminium metal scrap to be exempt from customs duty
Continuation of power sector reforms
Excise duty reduced on manufacturing of automobiles of certain specifications
Coal regulator to be appointed to oversee allocation of coal blocks
Encouragement to usage of green technology
Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary
Impact on sector
While reduction in customs duty on aluminium metal scrap is positive for certain secondary aluminium manufacturers, it is negative for ingot manufacturers like NALCO and HINDALCO
Increased investments in T&D will help boost demand for aluminium as the electrical sector is the major consumer of aluminium in the country
If the auto players pass on the reduced excise duty benefits, it will help spur auto demand, which in turn would drive demand for aluminium based auto components
Promotion of green technology will lead to demand shift towards aluminium owing to its environment friendly qualities like lower weight and better strength
The proposed coal regulator will help ease the process of allocating coal blocks, a key feedstock for captive power plants
Impact on companies
Companies like NALCO and HINDALCO will be positively impacted due to greater demand from sectors like auto and power
Customs duty exemption on aluminium metal scrap is likely to make its cost more competitive vis-a-vis the ingots being manufactured by NALCO and HINDALCO
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Oil & Gas 10,472.93 +1.11%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
What the Budget does
Foreign investment of US$ 3.5 to 8 bn expected for exploration of new blocks under NELP VII.
Customs duty exemption withdrawn on naphtha used in the manufacture of polymers. It will be taxed @ 5 %. Naphtha imported for the production of fertilisers will remain exempt.
Ad valorem excise duty on unbranded petrol and unbranded diesel replaced by an equivalent specific duty of Rs.1.35 per litre. There will be only a specific duty of Rs 14.35 per litre on unbranded petrol and Rs 4.60 per litre on unbranded diesel.
Central Sales Tax reduced from 3% to 2% from April 1, 2008.
Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary
Impact on sector
Polymer industry will be negatively impacted, as costlier Naphtha will push its cost structure upwards.
Polymer in turn is used in a host of downstream sectors such as plastics and paints, which will face margin pressures.
Oil downstream segment will continue to suffer under recoveries from petroleum products as the budget does not address either product prices or the excise duties.
Impact on companies
The polymer segment of RIL and GAIL will be adversely impacted, as the raw material costs will go up. Given that the petrochemical segments had a bad 3QFY07, this development comes at a bad time.
No respite for PSU oil marketing companies-IOC, HPCL, BPCL.
The announcement on dividend tax will benefit IOC, HPCL and BPCL as they have refineries as subsidiaries.
GAIL will benefit from the reduction in CST as natural gas falls under inter state trade.
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BSE PSU 9,234.21 +0.65%
Nov 25, 15:29
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Healthcare Budget
Pre-budget Outlook
This being the last Budget before the next general elections, PSUs can expect less tinkering with their policies and plans. The past four years of the current government have seen no major divestment of PSU stakeholding to private or strategic partners. While PSU companies from most of the industries have raked in strong growth rates during this period owing to the overall economic momentum, the fact that their efficiency levels remain at low levels as compared to private sector players cannot be doubted.
Industry wish list
IEEMA (Power PSUs)
Infrastructure status to power sector on par with telecom, roads and ports
Tax relief to be made available to PSUs for activities in rural areas in line with those extended to the Rajiv Gandhi Gramin Vidyutikaran Yojana
Hike budgetary allocation to SEBs for APDRP scheme to Rs 80 bn by next year
Cut excise on products and components supplied to the sector from 16% to 8%
FICCI (Energy PSUs)
Currently, the first 7 years of commercial production/refining are provided as a tax holiday under 80-IB. Instead, flexibility to choose any 7 consecutive years out of the first 15 years.
Alternately, tax holiday for any 10 consecutive years out of first 15 years of commercial production/refining under section 80-IA on par with the Power sector.
Levy of service tax @ 12.36% (inclusive of education cess) on survey and exploration, site formation, mining services, etc should be abolished.
Include natural gas in the list of 'declared goods' under section 14 of the Central Sales Tax Act in order to reduce incidence during inter-State trade.
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Power 3,009.44 +0.08%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
What the Budget does
Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five more UMPPs to the bidding stage by extending the required support.
Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan period with a capital subsidy of Rs 280 bn; allocation of Rs 55 bn for FY09.
Rs 8 bn to be provided for Accelerated Power Development and Reforms Project (APDRP) in FY09.
Proposal to set up a national fund for transmission and distribution (T&D) reform in the power sector.
Coal distribution policy and appointment of a coal regulator to bring regularity to the process of coal production and pricing
Exemption from 4% additional duty of customs has been withdrawn on power generation projects (other than mega power projects)], transmission, sub transmission and distribution projects, and specified goods for high voltage transmission projects.
Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.
Impact on sector
Aggressiveness in allotting UMPPs to prospective bidders expected to be helpful in speeding up the generation capacity expansion programme.
Setting up of a national fund for T&D reforms to provide a more focused approach towards these segments.
Higher allocation to APRDRP to speed up reduction in losses of state electricity boards.
Coal distribution policy and appointment of a coal regulator to bring regularity to the process of coal production and pricing.
Removal of exemption from additional customs duty on power generation, transmission and distribution projects to increase cost for companies implementing such projects
Impact on companies
Generation companies like Tata Power, NTPC to benefit from allocation of UMPPs at a faster rate
National fund for T&D reforms to help the prospects of companies looking at open access, like Tata Power and Reliance Energy.
Reforms in the coal sector to help generation companies like NTPC, Tata Power and Reliance Power.
Removal of custom duty exemption on power projects to impact companies like NTPC and Tata Power who are planning to take aid of foreign engineering companies in setting up such projects.
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Realty 3,718.65 -2.77%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
Budget 2008-2009 was largely neutral for the Real estate sector. There was no direct benefit accrued to the sector.
We continue to remain bullish on the real estate sector on back of demand growth mainly driven by large
population, higher consumer spending, growing urbanization and availability of financing options.
Impact Table
| Item | Current Status | Change in Budget | Impact |
| Five year tax holiday for hotels (U/S 80 ID) | 100% of profits is deducible for the 5 years commencing from initial assessment year in case of an undertaking engaged in hotel business (2,3,4 star category) located in National Capital Territory of Delhi and the districts of Faridabad, Gurgaon, Gautam Budh Nagar and Ghaziabad. Which is constructed and started or starts functioning between April 2007 to March 2010. | Extended to World Heritage Sites. Which is constructed and started or starts functioning between April 2008 to March 2013. | Positive: Real estate companies, who have plans to enter into hospitality space, are expected to benefit from this. |
| Steel | Excise duty (CENVAT) in steel - 16%. | Excise (CENVAT) in steel
reduced from 16% to 14%. | Positive: Reduction in excise duty on steel is expected to lower the cost of construction and hence can have a positive effect on the sector. |
Source - SBICAP Securities Limited
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BSETECK 3,049.81 +0.09%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
Telecom
What the Budget does
Roll out of national rural employment guarantee scheme to all 596 districts in India with a provision of Rs 160 bn.
Specified inputs and raw materials for manufacture of specified electronics/ IT hardware items have been exempted from excise duty.
Additional duty of 1% to be levied on imported mobile phones towards national calamity contingency reserve.
Countervailing duty on wireless data modem cards with exempted by way of excise duty exemption. These goods are already exempt from customs duty. However, 4% additional duty of customs will be attracted.
Internet telecommunication service brought under the service tax net.
Customs duty on convergence products to be reduced from 10% to 5%.
Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.
Impact on sector
Roll out of national rural employment guarantee scheme to all 596 districts in India to aid faster penetration of mobiles.
Exemption from excise duty for specified inputs and raw materials for manufacture of specified electronics/ IT hardware to lower the network cost for telecom service providers.
Additional duty on imported mobile phones to make handsets expensive, thus prohibiting a faster acceptance.
Imposition of service tax on Internet telecommunication services to make them expensive.
Reduction in customs duty on convergence products to help establish parity between devices used in the information/communication sector and the entertainment sector.
Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.
Impact on companies
Wider rollout of national rural employment guarantee scheme to aid faster penetration of mobiles and consequently faster growth of Bharti Airtel, Reliance Communications and Vodafone in these areas.
Lower network equipment costs to benefit mobile service players like Bharti Airtel, Vodafone, Idea and Reliance Communications.
Additional duty on imported mobile phones to restrict volume (subscriber) growth for mobile services companies, though not in a major way.
Reduction in customs duty on convergence products to help companies like Bharti Airtel and reliance Communications in lowering their costs for DTH expansion.
Media
What the Budget does
Exemption from customs duty on specified parts of set top boxes and specified raw materials for use in the IT/ electronic hardware industry.
Reduction in customs duty on convergence products from 10% to 5%.
No change in the corporate income tax rates.
No change in the rate of surcharge and dividend distribution tax.
Impact on sector
The exemption of customs duty will bring broadcasting equipment like set top boxes on par with rates applicable on telecom equipment and provide a fillip to the DTH industry that uses set top boxes.
It will also encourage domestic production of set top boxes.
Impact on companies
The move will give a boost to the cable TV, direct-to-home (DTH) and IPTV operators.
The substantial revenue leakage currently present due to underreporting by the LCOs, will get corrected to some extent with the proliferation of set top boxes. Broadcasters like Zee, NDTV and TV18 would benefit from this move.
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BSE CG 13,501.72 +0.50%
Nov 25, 15:29
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Healthcare Budget
Post-budget analysis
What the Budget does
Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five more UMPPs to the bidding stage by extending the required support.
Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan period with a capital subsidy of Rs 280 bn; allocation of Rs 55 bn for FY09.
Rs 8 bn to be provided for Accelerated Power Development and Reforms Project (APDRP) in FY09.
Proposal to set up a national fund for transmission and distribution (T&D) reform in the power sector.
Exemption from 4% additional duty of customs has been withdrawn on power generation projects (other than mega power projects), transmission, sub transmission and distribution projects, and specified goods for high voltage transmission projects.
Custom duty on project imports reduced from 7.5% to 5%
Initiatives like skill development programme and setting up of industrial training institutes to be taken
Defense allocation to be increased by 10%
Excise duty being exempted on end-use basis, on refrigeration equipment (consisting of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration) utilising power of 50 KW and above.
Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.
Impact on sector
Aggressiveness in allotting UMPPs to prospective bidders expected to be helpful for engineering companies providing equipments and EPC services for power plants.
Setting up of a national fund for T&D reforms to aid growth prospects of equipment suppliers and T&D project developers.
Removal of exemption from additional customs duty on power generation, transmission and distribution projects to increase cost for companies importing such projects, which shall consequently be beneficial for domestic project developers. However, on the other hand, reduction in custom duty on project imports to nullify the impact.
Initiatives like skill development programme and setting up of industrial training institutes to reduce talent crunch for engineering companies, which are reporting high levels of attrition
Increase in defense allocation to aid prospect of companies providing defense equipments and technologies.
Impact on companies
Allocation of UMPPs to support growth if equipment and service providers like BHEL, L&T and Siemens.
Greater focus on the T&D front to be beneficial for ABB, Siemens, Crompton Greaves, Emco, Bharat Bijlee. Also, companies providing T&D project services like Jyoti Structures and Kalpataru Transmission to benefit.
Removal of exemption from additional customs duty on power generation, transmission and distribution projects to benefit domestic companies like BHEL, L&T, Siemens and Reliance Energy.
Skill development initiatives to pare pressure of attrition from companies like L&T and BHEL.
Increase in defense allocation to aid prospects of Tata Power, L&T and Bharat Electronics.
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FMCG 2,928.63 +1.45%
Nov 25, 15:29
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FMCG Budget
Post-budget analysis
What the Budget does
Higher excise duty on non-filter cigarettes.
Reduction in excise duty from 16% to nil on tea and coffee mixes.
Reduction in excise duty from 16% to 8% on water purification devices, specified packaging material and breakfast cereals.
Tea Fund to get Rs 40 crore special support fund, while Tea Research association would get Rs 20 crore.
Customs duty on bactofuges reduced from 7.5% to nil
Excise duty on paper, paper board and articles manufactured out of non-conventional raw materials reduced from 12% to 8% with a further reduction on clearances up to 3,500 MT from 8% to nil. Excise duty on certain varieties of writing, printing and packaging paper is to be reduced from 12 %to 8%.
General CENVAT rate on all goods reduced from 16% to 14%.
Central sales tax rate reduced from 3% to 2%.
Impact on sector
Higher excise duty on non-filter cigarettes will bring it on par with both filter cigarettes. This is negative for the tobacco segment, which is already highly taxed.
Reduction in excise duties on packaging products would provide thrust to the packaging segment. It would also help reduce wastage and spoilage.
Reduction in excise duties on tea, coffee, water purification devices and breakfast cereals would lead to reduction in their cost and spur demand. Further, funds provided for re-plantation and rejuvenation of tea and coffee would improve the production.
Customs duty reduction on bactofuges would benefit dairy industry and increase shelf life of milk.
Impact on companies
ITC has leading brands in the non-filter segment like Scissors, Hero, Bristol, and Capstan. While higher excise duty would reduce its sales volumes in non-filter segment, no increase in excise on filtered cigarettes is positive. Further, reduction on excise on paper and paperboard would boost demand.
Reduction in water purification devices would help Hindustan Unilever by way higher demand for its product 'Purefit' that it recently launched.
Reduction in excise on tea, coffee and breakfast cereals would help companies like Tata Tea, HUL, Nestle, McLeod Rusell. Also the funds provided for plantation crops would benefit Tata Tea, Tata Coffee and Mcleod Rusell.
Packaging materials is one area where most FMCG companies had expectations from the budget. The reduction in duties would drive growth in the processed foods and personal care segment. Essel Propack, Paper Products and FMCG companies in food segment like HUL, ITC, Nestle and Britannia would benefit.
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