PostBudgetReview201314

IndiaNiveshSecuritiesPrivateLimited
email:research@indianivesh.in |Website:www.indianivesh.in

IndiaNiveshResearch

February2013

MACROVIEW
NoImpetus p toeconomy yp provided, ,anopportunity pp ylost FY14 budget turned into a damp squib with no measures announced that can provide impetus to economy. In our view budget was probably made with one eye on general elections in near term & the other on somehow avoid any potential downgrade from rating agencies due to slipping of fiscal deficit target. With sleight of hand & smart window dressing the fiscal deficit number is shown as better than street estimates. However, like last year, the credibility of these numbers will come under scanner. Credibility an issue: Mere meeting/beating headline FD does not instill confidence because it has come from clever accounting. accounting Following points corroborate this fact: a) Revenues have been inflated with highly optimistic assumption on growth in GDP at 13.8% (nominal terms) in FY14. This number does not tally with any of the estimates provided till date including those f from government t agencies. i E Even th most the t optimistic ti i ti estimate ti t from f E Economic i Survey S suggests t Real R l terms GDP growth of 6.1 to 6.5% & inflation of ~6% in next year. Hence we do not understand how will this growth come? Also no concrete measures have been announced for reviving capex/investment cycle.

b) Based on strong growth in GDP, the government expects tax revenue to grow @18% over FY13. At the time when most of the corporate are struggling to sustain, services sector under pressure, such a high growth in tax revenue seems to be challenging. c) ) The FM has assumed Rs 400bn from disinvestment & ~140bn from sales of residual stake of government in companies like SUTTI, Balco etc. Telecom sector by way of spectrum fee/one time charge & other levies is likely to contribute another Rs 400bn. Sale from assets is marred with many
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(contd)
legal complications as many government departments are involved. Also the anomaly is Balco promoters themselves were willing to offer Rs 170bn for Balco/HZL which the government has not done anything about but they want to include that in FY14 calculations. As regards revenue from Telecom sector, in FY13, we have seen how auctions have failed miserably & contributed only Rs 10bn v/s estimated Rs 200bn. Thus there is a clear case of being over optimistic on non tax revenue. d) On the expenses side, as in the last year, there is a tendency to depress expenditure on subsidies. While the subsidy on account of food has been increased from RE FY13 Rs 850bn to Rs 900bn for FY14BE, amounts on fertilizer has been maintained at same level of FY13 & that of OIL subsidy has been actually estimated to be lower from Rs ~970bn to Rs 650bn. This can happen only in 2 cases either the fuel prices at retail level are increased so substantially that there is small subsidy requirement or International crude prices come down significantly. Going by global economic situation we do not expect any material drop in oil prices. In election year FY14, to expect substantial increase in retail level fuel prices also does not seem to be prudent. Thus we expect a miss on subsidy bill in FY14 too. It can only be met by way of deferring some subsidy payments to next year. Populist measures with an eye on elections 1. Increase target for agriculture credit from Rs 5750bn to 7000bn (an increase of ~22%). This is a means of providing incentive to rural population in penultimate year of election by the incumbent g government. Outlay on rural development & social schemes has been increased by 46% over FY13RE. Allocations to all social schemes have been significantly increased.
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2.

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(contd)
3. 4. Allocation of Rs 90bn made for Food Security Bill (this is when even the bill is not yet out, FM himself does not know what is there in the bill). Refinance from SIDBI to micro finance institutes .

Prudent measures taken: 1. 2 2. 3. 4. 5. Made RGESS more investor friendly & increased threshold limit for eligibility for this scheme. Provide P id extra t tax t benefit b fit of f Rs R 0.10mn 0 10 over & above b current t Rs R 0.15mn 0 15 on interest i t t for f first fi t time ti h home loan takers for buying house worth less than Rs 2.5 mn. Enhance penetration of insurance by opening branches of LIC & encouraging other insurers to do the same in smaller towns. Tweak STT rates favorably for equity markets, make FII investments easier in debt instruments, ETF etc. Enhance limit for raising money through tax free bonds by eligible institutions.

Disappointments 1. We were expecting some path for revival of capex cycle, which according to us is most important to reach GDP growth target. There is no announcement on this. FM has sounded CAD is a matter of bigger concern than FD, but there is no announcement that will address this issue. This is the reason we termed t d this thi budget b d t as wasted t d opportunity. t it

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(contd)
2. Increase surcharge on high income tax payers & companies with PAT of above Rs 100mn. These kind of discriminatory taxes distort the concept of equitable distribution of wealth & also lead to more tax evasion. Although in this case since the surcharge is small amount for the ultra rich individuals, it may not impact too much on evasion side. side For corporates under MAT effective tax rate will go up by 0.95% 0 95% & for other in nominal tax bracket it will go up by 1.55%. Pressurizing banks to lend more towards agri side when already most of the PSB are saddled with huge NPA burden. Also bringing Private Banks in interest subvention scheme for farm loans may put asset quality of Private Banks under stress. Ambiguity regarding taxation of investors coming from tax haven areas where DTAA is applicable. New addition to IT act, regarding Residency Certificate alone is not sufficient, was a major disappointment & has potential to result in similar kind of capitulation as we witnessed last year post implementation of GAAR.

3.

4.

Conclusion: Going by the reputation of FM being market friendly & pro reforms markets were expecting some directional moves that could revive growth. Post the series of measures announced since September 2012 hopes were raised even more that reforms will now resurface. However, unfortunately most of these hopes have been belied thus resulting in disappointment. We believe budget will not be able to provide any support to the markets & in case of any pressure coming from international liquidity f q y reducing g or drying y g up, p, our markets may y witness sharp p downward reaction. With budget out of the way, we expect markets will come back to basic fundamentals in a short time. Earnings growth has to revive to bring cheer back to markets. Our stand that markets are over optimistic in the first two months & FY14 earnings downgrades have to follow seem to be strengthening. In view of continued subdued macro picture hopes of any material rate cuts may get deferred a little longer. We remain cautiously optimistic on overall markets & continue with stock specific approach in line with our view given in the beginning of current calendar. Since this budget was more focused to macro factors there is not much impact on micro/sector. micro/sector Nevertheless ensuing pages contain our understanding of various provisions of budget & respective impact on specific sectors & stocks within. Most of the sectors are marked as neutral either due to no significant action or due to in line with expectation budget proposals.
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AUTOMOBILES
BUDGET IMPACT: NEGATIVE (Sector ignored by the policy makers) Budget 201314 disappointed automobile sector. Though this disappointment was not as much as it was last year but it was clearly ignored by the policy makers. Especially now when the sector is going through rough time (less than 5% growth in 9m FY13) it was expecting some relief in terms of export soaps, reduction in excise duty, higher depreciation allowance, deduction for R&D expenses, etc. Automobile sector is a job multiplier sector. Apart from OEMs, auto component industry, motor insurance industry and other related industries provide millions of job opportunities; therefore it is an important sector to focus and give incentive to flourish not only in domestic market b t also but l to t be b competitive titi from f export t point i t of f view. i
Issue PurchaseofbusesunderJNNURM (JawaharlalNehruNationalUrban RenewalMission) Proposal Upto10,000busestobepurchased Impact Positive forTATAMotors,AshokLeylandandEicherMotorswhich areleadingplayersinthebusspace space. SlightlyNegative forMaruti,TataMotorsandM&M.Inpercentage termtheextramoneyacustomerhastopayoutwillbe2.3%.We believecompanieswillpassonthistobuyers. Negative forTataMotors(Jaguarmodelsareimported)andM&M (Rexton inimported).

Excie dutyhikeonSUVs(vehiclelength exceeding4000mm&havingground Increasedfrom27%to30% clearanceof170mm&above)except thoseareusedastaxis Increasedonfullybuiltcarsfrom 75%to100%andmotorcyclesabove Importdutyhikeoncars&bikes 800ccthedutyhasgoneupfrom 60%to75%. Periodofconcessionavailablefor specifiedpartofelectric/hybrid Periodofconcessionavailablefor specified ifi dpartof felectric/hybrid l i /h b id vehicles hi l extended d dupto31.03.2015 31 03 2015
Source:BudgetDocuments;IndiaNiveshResearch

Positive forM&M(Reva)

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BANKING&FINANCIALSERVICES
BUDGET IMPACT: NEUTRAL (Lacks direction)

Budget Developments
Union Budget for FY13 was more of neutral to Banking Services & some what positive for Insurance & Financial services industry. Key budget announcements include higher credit allocation towards Agrisegment, increase in interest part of tax exemption for first time home buyers, banks allowed to act as insurance brokers. One positive for banking sector was announcement on recapitalization of Public Sector Banks (PSBs) to the extent of Rs 140 bn. Further, Insurance companies can now open branches anywhere in India without the permission of IRDA. , lowering g of STT, , extension of Rajiv j Gandhi Equity q y Savings g Scheme are p positives for the broking g sector. Also,
Issues Capitalization Proposal Allocate Rs 140 bn for PSBs to ensure they are Basel III complaint Add. Deduction of Rs 0.1 mn for a person taking home loan (up to Rs 2.5 mn) during 1.4.2013 to 31.3.2014 Increase Agricredit target to Rs 7,000 bn for FY14E; Extend d interestsubvention b scheme, h short h term crop loans now to private sector banks too Banks are allowed to act as Insurance brokers Companies Impacted Positive: for PSBs, probably SBI, PNB, BOI, UBI

Increase in tax deduction interest component

Positive: Benefit all Banks & NBFCs, esp. Housing Finance Companies like GIC Housing Finance & LIC Housing Finance

Agriculture credit

Negative: for all banks (esp. PSBs); Private banks ICICI, Kotak would ld now be b exposed d to Agrilending l d and d now their h NPAs may increase Positive: to benefit all banks, as being insurance broker, other income of the banks would benefit

Banksasinsurance brokers

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BANKING&FINANCIALSERVICES(contd)
Issues Tax Free bonds Proposal Tax free bonds amount of Rs 500 bn, will benefit companies which are majorly into infra finance Introduce CTT on nonagricultural commodities Companies Impacted Positive: for IFCs like IDFC, PFC & REC

Commodities Transaction Tax (CTT) Cut down the Securities Transaction Tax (STT) SIDBI to refinance Micro Finance loans; Rs 1 bn allocation to India Microfinance Equity Fund Rajiv Gandhi Equity Savings Scheme (RGESS) extended

Negative: for companies like MCX, FT

Reduce STT (Equity futures/ MF/ ETF redemption/ purchase/ sale transactions to 0.01%) Refinancing capacity of SIDBI has been increased to Rs 100 bn; Also, Rs 1 bn of allocation have been made towards India Microfinance Equity Fund

Positive: for companies like Religare, Edelweiss, IIFL

Positive: for Microfinancing institutions like SKS

RGESS gets liberalized (now first time investor can invest in mutual funds, also this benefit can be extended now to 3 years, income limit raised to Rs 1.2 bn) Now Insurance companies are free to open their branches without IRDA permission

Positive: for listed Stockbrokers such as Religare, Emkay, Edelweiss, IIFL, Geojit

Opening of branches by Insurance Companies

Positive: for Insurance players such as Max India

Source:BudgetDocuments;IndiaNiveshResearch

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CAPITALGOODS
BUDGET IMPACT: NEUTRAL (Below expectations as no major reforms announced) Within CapGoods segment, street was looking forward to update on power sector developments and any initiatives which would lead to revival in capex cycle. However, there were a major disappointment, as there we no announcements to revive the capex cycle (except one). one) Subsectors which benefit from increased government allocation are Defense Services & Water Purification. Also, there were a few smaller announcement related to Urban Infra & Ship Building sectors. Higher Road & Highways spending in FY14E in our view would lead to increase in demand for Construction Equipments.
Proposal Impact on Sector CompaniesImpacted Positive: BEL, BEML, Pipavav , Tata Motors amongst other private players Positive: L&T, Pipavav, Tata Motors amongst others 42.3%increaseindefense Capitaloutlay(Heavy Should help growth prospects of PSUs & Army &MediumVehicles +OtherEquipment) Vehicle manufacturers Ships&VesselstobeexemptedfromExcise Duty;NoCVDonimportedships&vessels HigherallocationtowardsRoads&Highways vertical Those investing g over Rs 1 bn towards p plant and machinery during 01042013 to 31032015, would be eligible to deduct 15% of investment done as investment allowance Rs 14 bn allocation towards Water Purification Plants
Source:BudgetDocuments;IndiaNiveshResearch

Beneficial to the Shipbuilding sector

Beneficial for Road Equipment players, who are Positive: Gujarat Apollo, Action Construction impacted due to slowdown in demand Equipment, BEML amongst others This incentive would lead to higher g profits for Positive: BHEL and those companies p p willing g those making investments now (also life of the to invest, however timeline is too short to plant in the books would get increased) initiate a project To benefit smaller ticket sized water purifiers Positive: Va Tech Wabag & other private players

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CEMENT
BUDGET IMPACT: NEUTRAL (Provided rural demand picksup)
Budget Developments Indian Cement sector has been in an oversupply stage for the last 2 years and this trend is expected to continue for next 12 years. Despite the current market dynamics, the cement price has been reeling high on expectations of demand revival. On the back of increase in allocation towards rural housing & Roads & Highways vertical, when coupled with elections due in 2014, strengthens our view that demand would revive and support higher prices. Further now with equalized duties on steam & bituminous coal, Further, coal we sense that it would have neutral impact on cement players, those with captive power plants (such as ACC, Ambuja, Ultratech and JP Associates). On a whole, we do not expect much impact on the profitability of frontline cement companies.
Proposal Impact on Sector 36% increase in allocation towards high cement Should lead to revival in demand consumption areas, such as Irrigation (148.7%), Roads & Highways (35.5%) Customs & CVD on steam coal increased to 2% from 0% and 1%, respectively; for bituminous coal Customs and CVD would be reduced to 2% from 5% & 6%, respectively Enhance allocation towards Rural Housing Fund from Rs 40 bn to Rs 60 bn Increase of duty on Steam coal (used for cement production) would almost nullify the benefits from decline in the duties of bituminous coal (for captive power plants) Should drive demand for rural housing and lead to increase in cement consumption Companies Impacted Positive: All cement companies would be benefitted Neutral: ACC, Ambuja, Ultratech, and JP Associates

Positive: Cement majors along with regional cement players such as JK Lakshmi Cement Ltd, Shree Cements, etc. Increase in tax rate on royalty y y & technical To impact p net margin g of companies p with non Negative: g For ACC & Ambuja j services fees for nonresident parent company Indian parent companies, such as, Heidelberg from 10% to 25% etc.
Source:Budgetdocuments,IndiaNiveshResearch

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FMCG
BUDGET IMPACT: POSITIVE (Rural consumption to boost revenue growth...) Relative to other key sectors the Union Budget 201314 had a few positive surprises for FMCG pack, except increase in excise duty y on cigarettes. g The high g doubledigit g increase in agriculture g credit and various rural employment generating schemes could lead to increase in rural disposable income. We believe this should strengthen rural consumption story, which remained the key driver for FMCG sector for past few years. Hence, we believe, budget should be a volume booster for FMCG sector going ahead.
Issues Specific Items Excise Duty Cigarettes Specific Items Customs Duty Peanut Butter Rural Development Scheme : NREGA/PMGSY Proposal Excise duty increased by about 18% Companies Impacted Negative : ITC,VSTInds,Godfrey Phillips Positive: Agro Tech Foods Ltd. Positive : Entire FMCG sector

Exempted from basic customs duty 13%/2.3% yoy growth in NREGA/PMGSY programme would lead to an increase in disposable income and strengthen consumption story (largely driven by the rural areas). ) 22% increase in credit flow to agriculture sector to Rs.7,000 bn Increase in tax rate on royalty & technical services fee to nonresident parent company from 10% to 25%

Agriculture Credit Tax Rate

Positive : Entire FMCG sector Neutral : Entire FMCG sector

Source:BudgetDocuments;IndiaNiveshResearch

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INFRASTRUCTURE
BUDGET IMPACT: NEUTRAL (But a lot could have been done) Budget Developments
Apart from addressing broader Infra verticals, FM picked up Roads & Highways, Urban Infra verticals and announced higher spending plans (on back of 2014 elections). In road sector, instead of addressing structural issues (delays in getting clearances & financing woes), FM announced setting up of a regulatory body for Roads & Highways sector, which would in our view would be painful for Infra players in the near term, but good for the long term
Proposal 29.6%increaseinNHAIallocationtoRs375bn forFY14E;BuildroadsinNE;3,000kmsofroad projectstobeawardedinH1FY14E Regulator for Roads & Highways vertical Impact on Sector Companies Impacted

Road subsector which witnessed slowdown in Positive: ITNL, Sadbhav Eng, IRB Infra, award activity should see some revival Ashoka Buildcon, MBL Infra, J Kumar Infra

Would address issues such as tariff setting, Positive: ITNL, Sadbhav Eng, IRB Infra, service quality levels, assess concessionaire Ashoka Buildcon, MBL Infra claims, servicelevel benchmarking , etc. (near term negative, but long term positive) Positive: ITNL, IRB, GMR, GVK, Sadbhav, amongst others

Raise Rs 500 bn Tax free bonds towards financing Should address funding foes of Infra players up of Infra. projects to certain extent Rs 9,116 bn spending towards Irrigation projects

Positive for Irrigation EPC players, but remain Positive: IVRCL, NCC, Ramky Infra concerned d about b actual l execution i

Source:BudgetDocuments,IndiaNiveshResearch

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INFORMATIONTECHNOLOGY
BUDGET IMPACT: NEUTRAL (No new development) As expected, there was no surprise for IT/ITES sector in Union Budget 201314. Against the industry wish list, nothing g was mentioned in relation to SEZ, dual taxation and simplification p of service tax refund p process issues. However, higher allocation towards egovernance and emphasis on various educational schemes would benefit companies catering to the domestic market and K12 segment. Further, promoting domestic production of semiconductor wafer fab manufacturing through Electronic Policy and budget is an opportunity but could be explored only in the long run.
Issues
SSA/RMSA/NSDC

Proposal
17%/25.6% yoy increase in Sarva Shiksha Abhiyaan (SSA)/Rashtriya Madhyamik Shiksha Abhiyan (RMSA) and Rs.10 bn allocation towards National Skill Development Corporation (NSDC) Positive for all ITeducation companies, offering K12/vocational education

Companies Impacted
Positive: NIIT,Educomp,Everonn

eGovernance

Modernisation of postal network in order to offer real time banking services at a cost of Rs.49 bn Various incentives to semiconductor wafer fab manufacturing facilities, including zero customs duty for plant & machinery

Positive:TCS,Infosys,Wipro

CustomDuty

Positive: Moschip SemiconductorTechnology Ltd.

Source:BudgetDocuments;IndiaNiveshResearch

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OIL&GAS
BUDGET IMPACT: NEUTRAL (Besides no clarity on subsidy sharing mechanism and pricing of natural gas one more ambiguity added in E&P side)
Overall budget impact on the sector is Neutral with respect to any new proposals; however, it is negative with respect to key k prebudget b d expectations. There h was a disappointment d towards d 1) ) Extension of f tax holidays h ld f for refineries 2) clarity on the subsidy sharing mechanism and natural gas prices. The government has allocated budgetary support of Rs 650 bn towards petroleum subsidy in 1314 on hope that partial deregulation of oil production will led to lower underrecovery (that is significantly lower than of revised budget estimates 1213 of Rs. Rs 968 bn). bn) Further The govt. govt proposal to move toward a revenuesharing model would have negative impact on companies like Cairn India, RIL and other upstream companies. However some positive announcement made towards the reviewing pricing of natural gas that is already known in the street.
Issues Movetowardsa revenuesharingmodel Proposal Oil and gas exploration contracts will now be awarded on a revenue sharing basis, shifting from the current profitsharing Impact Under the current system, the oil firms first recover their costs from sales l of f oil il and d gas and d then th share h profits fit with ith the th Govt. G t After Aft the th change in system govt. will start getting its share with the start of production in the field irrespective of the cost recover . Negative for RIL, Cairn India and other upstream companies. Positive : If gas prices are hiked, it will promote further investment in gas sector and will be positive for upstream companies like, ONGC. Oil India , Cairn and RIL. There will be negative impact on petrochemical businesses of GAIL but would offset by increase in volume of natural gas. It will adversely impact the financial prospects of end users, especially power and fertilizer sector Neutral for OMCs and upstream companies RIL

gas Reviewonnaturalg pricehike

The p pricing g of natural g gas will be reviewed so as to remove the uncertainties on the issue

Extend the tax holiday to natural gas sectorand refineries Policyregardingshale gas

No announcement made

A policy to encourage exploration and production of shale gas will be announced.

Positive It will reduce dependence on oil and gas imports

Source:BudgetDocuments;IndiaNiveshResearch

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PHARMA
BUDGET IMPACT : NEUTRAL There was no specific announcement for pharma sector in Budget 201314 except few small ones. On the line of NRHM (National Rural Health Mission) government announced NUHM (National Urban Health Mi i ) in Mission) i the th previous i years budget b d t session, i which hi h is i likely lik l to t be b implemented i l t d from f current t year onwards. d Despite, extension of healthcare scheme from rural regions to urban region, overall allocation to New National Health Mission (NRHM+NUHM) increased only 2% yoy to Rs 212 bn in FY14E. Other than that, Finance Ministry allocated Rs 16.5 billion for six AIIMS like Institutes & Rs 10.7 billion for AYUSH. Hence, total allocation budgeted to Ministry of Health & Family Welfare has been Rs 327 billion for FY14E, FY14E compared to Rs 305 billion allocated in the starting of previous budget session and than revised downward to Rs 249 billion currently, for FY13E. We dont anticipate any direct impact on healthcare & pharma sector from the current budget.
Issues Industrywishlist Ourexpectation MAT exemption Could exempt from MAT to all Unlikely from SEZ manufacturing units in SEZ to promote investments & exports. Exciseduty& Maintain Custom duty & Excise duty Likely Customsduty at the same level. SubInfrastructure status In order to meet challenges & Unlikely attract investment, government may come out with guidelines to give infrastructure status to Healthcare. Budget Outcome Inlinewithourview. Impact No Impact.

In line with our expectations

No impact. impact

Inline withourexpectations.

No impact.

Source:BudgetDocuments;IndiaNiveshResearch

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POWER
BUDGET IMPACT: POSITIVE (Fuelled with small positive but major reforms still pending) The Budget was positive for the Power sector. As expected, tax holiday under Section 80IA was extended by one more year till March 2014. To meet the fuel requirement for power the govt. proposed to encourage Publicprivatepartnership (PPP) model to raise coal production. Further reduction in duty on Bituminous coal is the positive for the company which have high exposure on imported coal.
Issues Extension of 80 IA benefit Proposal Tax holiday under section 80IA for power projects extended from 31.3.2013 to 31.3.2014. Duties on Steam Coal and Bituminous Coal equalized and 2 percent custom duty and 2 percent CVD levied on both kinds coal. Impactofourexpectation Positive Extension will benefit the companies which are commissioning plants after March2013, such as R Power, CESC, NTPC, Adani Power, JSW Energy etc. Positive As bituminous coal is highly used for power generation and reduction in duty is positive for Adani Power, Tata Power and JSW energy.

Duties on Steam Coal and Bituminous Coal equalized

PPPpolicyframeworkwithCoalIndia

Publicprivatepartnership (PPP) model should be followed to raise coal production. Govt. proposed a PPP policy framework with Coal India Ltd as one of the partners in order to increase production to supply to power producers and other consumers No announcement made

Positive for sector as a whole

Changeinpolicypertaining p fuelbased p projects j to imported

Negative for Tata Power, R Power and Adani Power

Restructuring planofSEBs

State Government urged to prepare the financial restructuring plan, quickly sign MoU and take advantage of the scheme

Neutral: No announcement made regarding Budgetary allocation of fund to SEBs for restructuring their debt

Reintroducegenerationbased incentivesforwind energyproject

The govt. will provide Rs. 8 bn to the ministry of new and renewable energy for the purpose. purpose

Positive for Tata power and Suzlon

Source:BudgetDocuments;IndiaNiveshResearch

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REALESTATE
BUDGET IMPACT: NEGATIVE (Negative news flow continues)

Budget Developments
Residential Real Estate markets across the country has been witnessing slowdown. With weaker balance sheets, and current challenging macroenvironment, sector on a whole was looking towards budget with lots of expectations. Levy of 1% TDS on transfer of Immovable Property, which was rolled back in May2012 has been again proposed. Also, extension of interest subvention scheme has not been made. The only respite amongst these negatives have b been i increase i tax deduction in d d i interest i component of f an individuals i di id l filing fili to Rs R 0.25 0 25 mn.
Proposal Impact on Sector Companies Impacted Negative: All Real Estate companies would be impacted Negative: All Real Estate companies to be impacted

Levy of 1% TDS on transfer of Immovable Should lead to an increase in the transaction costs Property with value of more than Rs 5 mn (other than Agri. Land) Increase on excise duty on marble from Rs Should lead to increase in costs 30/sq.m to Rs 60/sq.m Increase in tax deduction interest component from Rs 0.15 0 15 mn to Rs 0.25 0 25 mn for housing loans taken in FY14 (provided loan value is less than Rs 2.5 mn) Rate of abatement reduced from 75% to 70% for flats with carpet area of 2,000 sft or value Rs 10 mn (i.e. (i e highend constructions with high component of services)
Source:Budgetdocuments,IndiaNiveshResearch

Residential home buyers may get benefited & Positive: Ackruti, Vascon, Parsvnath, HDIL affordable housing developers may witness some increase in demand Should lead to increase in total cost of flats Negative: Premium Developers (DLF, Unitech) & TierI city Developers (Oberoi Realty DB Realty ) would be impacted Realty,

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TELECOM/MEDIA
BUDGET IMPACT: NEUTRAL (Regulatory constrains remain)
As expected Union Budget 201314 turned out be a nonevent for Telecom sector. Increase in custom duty on Set Top p Boxes remains negative g for DTH service p providers. However, , increase in the excise duty y on mobile p phone set costing more than Rs.2,000 should not put any strain on the pockets of telcos (passed on to the consumer). Parallel to the last budget government has pencilled in ~Rs.400 bn revenue from the upcoming 2G spectrum auction. This illustrates that market expectation of softening in regulatory hurdles is a false assumption. There is no doubt that sector has potential with 34% of rural teledensity & enormous opportunity for the 2G/3G data expansion. However this could only pan out as a reality only on the willingness of the regulators. However, regulators We expect some clarity of few pending regulatory issues during the announcement of Spectrum Enactment Act.
Issues Custom Duty Proposal Increase in custom duty from 5% to 10% on SetTop Boxes Companies Impacted Negative: BHARTI, BHARTI RCOM, RCOM Dish TV, TV Tata Sky etc Neutral: BHARTI,IDEA,RCOMetc

ExciseDuty

For mobile phones priced at more than Rs.2000 excise duty is increased from 1% to 6%. However, we expect this to be passed on to the customer. customer

Source:BudgetDocuments;IndiaNiveshResearch

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RESEARCHTEAM
DaljeetS.Kohli HeadofResearch Mobile:+917738393371,9920594087 Tel:+912266188826 daljeet.kohli@indianivesh.in AmarMourya ResearchAnalyst Tel:+912266188836 amar.mourya@indianivesh.in Y.Santosh ResearchAnalyst Mobile:+917738393416 Tel:+912266188840 s.yellapu@indianivesh.in AbhishekJain ResearchAnalyst Mobile:+917738393433 Tel:+912266188832 j @ abhishek.jain@indianivesh.in BhagwanSinghChaudhary ResearchAssociate Mobile:+917738393427 Tel:+912266188835 bhagwan chaudhary@indianivesh in bhagwan.chaudhary@indianivesh.in SumanthMuvvala AssociateAnalyst Mobile:+917738393414 Tel:+912266188839 sumanth muvvala@indianivesh in sumanth.muvvala@indianivesh.in

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