Automobiles - Negative
| Key announcements | Impact |
| What came in? |
|
| Hike in excise duty by 2% | Negative for all manufacturers |
| Increase in ad valorem duty on large cars, MUVs and SUVs | Negative for M&M, Tata Motors and luxury car manufacturers |
| Higher allocation to NREGS | Positive for M&M, Hero Honda and Maruti |
| Higher deduction on expenditure incurred on in-house R&D from 150% to 200% | Positive for automobiles and auto ancillary manufacturers |
| Hike in excise duty on petrol and diesel | Negative for all manufacturers |
|
|
| What did not come? |
|
| Extension of accelerated depreciation for CVs | Negative for Tata Motors and Ashok Leyland |
Banking - Positive
| Key announcements | Impact |
| What came in? |
|
| New banking licenses for few private sector players and NBFC’s subject to meeting RBI’s eligibility criteria. | Positive for NBFC’s such as Reliance Capital, IFCI, M&M Financial services. |
| Capital Infusion of Rs165bn for PSU banks in FY11 thereby enabling them maintain Tier I capital above 8% by March 31, 2011. | Positive for small PSU Banks - Dena Bank, Syndicate Bank, UCO Bank & United Bank of India. |
| Extension in repayment of the loan under the Debt Waiver and Debt Relief Scheme for farmers by six months to June 30, 2010 | Positive for PSU Banks. |
| IIFCL to refinance bank lending towards infrastructure projects. | Positive for banks as it would improve ALM and increase funding to the sector |
| FY11 net market borrowings of Government estimated at lower Rs3.45tn; fiscal deficit for the year pegged at 5.5% of GDP | Positive for the sector, with pick up in credit demand clarity over the borrowing programme will ensure adequate moves in interest rates, and leaving negligible impact on bank’s treasury book. |
| Extension of interest subvention scheme to March 31, 2011 on housing loans upto Rs1mn on property value upto Rs2m. | Positive for Housing Finance Companies and Banks with home loan portfolio. |
| Interest subvention of 2% for farmers who repay their short-term crop loans on schedule. | Neutral as long as the interest part waived is re-paid by the GoI to banks. |
| Impetus towards Financial Inclusion | Positive for the sector in general as it aims at reaching unbanked areas thereby increasing the penetration levels of Insurance and other financial products. |
Cement - Neutral
| Key announcements | Impact |
| What came in? |
|
| Increase in rural infrastructure spending | Positive as this will lead to higher consumption |
| Increase in IT slabs leading to surge in disposable income | Beneficial as this will lead to higher private housing demand resulting into higher cement consumption |
| Upward revision in excise rate on cement and clinker | Negative for the sector |
| Levy of Rs100/ton on coal mined in India | Negative for the cement players as this would increase the power cost |
|
|
| What did not come? |
|
| Re-imposition of custom duty on imports | Negative for all cement manufacturers |
| VAT on clinker and cement be brought down to 4% | Negative for sector |
Construction - Positive
| Key announcements | Impact |
| What came in? |
|
| Rs1.7trn (46% of the total plan allocation) towards infrastructure development | Positive for all Infrastructure development companies operating under PPP model |
| Allocation for road transport increased by 13% to Rs199bn | Positive for road development companies like IRB, IVRCL, HCC and J Kumar Projects |
| Increased allocation to railways to Rs167bn | Positive for wagon manufacturers, players laying transmission lines, railway sliding manufacturers, railway transformer manufacturers and other infrastructure companies |
| Increased IIFCL disbursement target to Rs200bn by March 2011, take out financing scheme to initially provide finance for ~Rs250bn over next three years | Positive for all infrastructure companies |
| Allocated Rs480bn for rural infrastructure programmes under Bharat Nirman | Positive for T&D & transformer manufactures like EMCO, Bharat Bijlee, Crompton Greaves, Indo tech, KEC international, Jyoti Structures |
FMCG - Positive
| Key announcements | Impact |
| What came in? |
|
| Continued spending on rural and social development | Positive for all FMCG companies |
| Roll-back in excise duty reduction from 8% to 10% | Negative for FMCG companies especially HUL as higher sales from non-excise free units. Neutral for Dabur |
| New excise slab of Rs669/100 sticks introduced in filter cigarettes under 60mm. Excise on other filter cigarettes raised by 9-18%, excise on non-filter cigarettes (>60mm but <70mm) increased by 11% | Negative for cigarette manufacturers. Marginal impact on ITC (exited non-filter segment), has already increased prices of its Gold Flake brand and can take suitable price hikes to mitigate the impact |
| Government to set up five additional mega food parks | Positive for food processing companies |
| Excise duty of 10% levied (earlier Nil) on baby & clinical diapers and sanitary napkins | Negative for Procter & Gamble Hygiene and Health Care |
| Excise duty on goods covered under the Medicinal and Toilet Preparations Act reduced from 16% to 10% | Positive for HUL as deodorants and perfumes could get cheaper |
| Concessional customs duty of 5% presently available on specified machinery for tea and coffee plantation extended and excise duty exemption on these items is re-introduced upto 31.03.2011 | Positive for tea and coffee plantations companies like Mcleod Russel, Tata Coffee |
| Increase in MAT rate from 15% to 18% | Negative for Dabur and GCPL |
| Current surcharge of 10% on domestic companies reduced to 7.5% | Positive for Nestle, GlaxoSmithKline Consumer Healthcare |
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|
| What did not come? |
|
| 3 years accelerated depreciation of 200% on R & D for new units in Food Processing and Packaging | Negative for food processing companies |
Hotels - Positive
| Key announcements | Impact |
| What came in? |
|
| Commencement of operations for 2-star, 3-star or 4-star hotels/convention centre in NCR constructed during 01/04/07 to 31/03/10 extended to 31/07/10 to be eligible for 100% deduction of profits for 5 years u/s 80 ID | Would give more time for hotels slated to open in lieu of Commonwealth Games in Oct’ 10 so as to remain eligible for 100% deduction of profit for 5 years |
| Provide 100% deduction on capital expenditure (other than on land, goodwill and financial instrument) u/s 35AD to 2-star or above category of hotels irrespective of location; currently specified categories of hotels in NCR etc enjoy profit linked deduction under Chapter VI-A of IT Act | Beneficial to all players who commenced new hotel operations post April 1, 2009; Indian Hotels and Hotel Leela key benefactors in our coverage |
Information Technology - Neutral
| Key announcements | Impact |
| What came in? |
|
MAT rate increased from 15% to 18%
| Negative for all IT companies, more so for medium and small sized entities |
| Calculation of tax exemption for SEZs under the revised formula has been made effective FY07 | Positive for large software companies due to their material SEZ presence |
| Levy of service tax on IT software under all cases irrespective of the end usage | Negative for all software services companies |
| Pre-packaged IT software exempted from service tax | Positive for product companies |
| Significant increase in plan allocation for school education | Positive for education companies such as Educomp, Everonn, Aptech, etc |
Approval of three new projects under National Skill Development Corporation worth ~Rs450mn
| Positive for education companies having presence in vocational segment such as Educomp, Everonn, Aptech, etc |
| Process of refund of accumulated credit for service tax made easy for exporters of IT and BPO services | Positive for IT and BPO companies having significant international business |
|
|
| What did not come? |
|
Extension of tax holiday for STP units and EOUs
| Negative for all IT companies, more so for medium and small sized entities |
Metals and Mining - Neutral
| Key announcements | Impact |
| What came in? |
|
| Increase in infrastructure spending | Positive for the sector as this will lead to higher domestic consumption |
| Increase in excise duty by 2% | Companies will not be able to pass on the complete rise in cost, marginally negative for steel manufacturing companies |
| Increase in MAT from 15% to 18% | Will be negative for companies like JSPL and Sterlite as tax rate for their power subsidiaries would increase |
| Levy of Rs100/ton as clean energy cess on coal mined and imported into India | Negative for the metals companies as this would increase the cost of coal consumed |
| Decrease in surcharge on domestic companies from 10% to 7.5% | Positive for all the companies, will lead to lower tax outgo |
|
|
| What did not come? |
|
| Removal of customs duty on steel products | Positive for steel manufacturers, as the difference in domestic and international prices will not reduce |
| Increase in export duty on iron ore | Positive for Sesa Goa as exports constitute 93% of total revenue, Marginally negative for steel manufacturers who don’t have captive mines |
Oil and Gas - Negative
| Key announcements | Impact |
| What came in? |
|
| Hike in customs duty on crude oil from 0% to 5% | Positive for ONGC and Cairn |
| Hike in custom duties on petrol and diesel from 2.5% to 7.5%. Hike in excise duty by Re1 on petrol and diesel. | Negative for ONGC & GAIL (upstream companies bear losses on auto fuels). However petrol and diesel prices have been raised to offset the impact |
|
|
| What did not come? |
|
| De-regulation of petrol and diesel pricing | Negative for OMCs as ambiguity continues to stay on subsidy sharing pattern |
| Clarification on 80-IB benefit for gas exploration | Negative for RIL and ONGC |
Real Estate - Negative
| Key announcements | Impact |
| What came in? |
|
| Service tax levied on additional services provided by a builder to buyers for extra charge like preferential location, internal and external development of complexes | Negative for all |
| Renting of property, rent of vacant land under agreement to undertake construction of building or other structures to be charged service tax | Negative for all |
| Increase in personal income tax slabs, higher allocation under Indira A\was Yojana and other rural development/infrastructure schemes | Positive for all |
| Extension of interest subvention scheme to March 31, 2011 on housing loans upto Rs1mn on property value upto Rs2m | Positive for companies focusing on affordable housing |
| Pending housing projects to be completed within a period of five years instead of four years for claiming a deduction of their profits | Positive for all |
Telecom - Neutral
| Key announcements | Impact |
| What came in? |
|
| Full exemption from basic customs duty and CVD extended to parts for manufacture of battery chargers and hands-free headphones; exemption from 4% special additional customs duty on parts used to make mobile phones extended till 31/03/11 | Would encourage manufacture of mobile phones accessories |
| FY11 3G auction revenues budgeted at Rs350bn, which is carried over from the current fiscal as proposed auctions would now be conducted in April 2010 | Telecom operators may not bid as aggressively given the current state of sector leading to shortfall in budgeted 3G revenues. |
Utilities - Positive
| Key announcements | Impact |
| What came in? |
|
| Plan allocation for the sector excluding RGGVY doubled to Rs51bn | Positive for power ancillary companies like KEC International, Kalpataru Power, Jyoti Structure, EMCO, Crompton Greaves, Bharat Bijlee |
| Set up a Coal Regulatory Authority to create a level playing field in the coal sector | Positive for power generators as it will accelerate coal mine allocation and mining process |
| Plan layout for renewable energy increased by 61% to Rs10bn | Positive for Suzlon, Websol Energy, Moser Baer |
| Full exemption from excise duty on additional specified raw material for manufacturing of rotor blades for wind operated electricity generators | Positive for Suzlon |
| Full exemption from central excise duty to goods supplied to mega power projects for which power supply has been tied up through tariff based competitive bidding | Positive for electrical equipment manufacturers and players setting up mega power projects as it will reduce capex |
| Rs100/ton levied as clean energy cess on coal and lignite produced and imported into India | Negative for merchant power producers like Tata Power, GVK, Lanco, Adani Power, JSPL, Sterlite Energy and Reliance Power. No impact on players governed under regulatory tariffs as all costs are pass through |
| Service tax on service provided by electricity exchanges | Negative for Power Exchange of India and Indian Energy Exchange, also negative for power traders like PTC, NTPC, Tata Power, Reliance Infrastructure, JSW Power Trading, Lanco, GMR as cost of trading will increase |
| Transmission of electricity will now be exempted from service tax | Positive for Power Grid, Reliance Infrastructure, Tata Power, CESC |
|
|
| What did not come? |
|
| Impose import duty on power plant equipments | Negative for domestic equipment manufacturers like BHEL, L&T, Siemens
Positive for generating companies like Reliance Power, Tata Power, CESC and Sterlite Energy using imported equipments |
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