UNION

20122013Analysis

PoliticallyCorrect
Vineet Hetamasaria,CFA HeadofResearch +912266186388 vineet.hetamasaria@pinc.co.in

16March,2012

Sectoral ImpactSnapshot
Auto Cement Fertiliser FMCG Infrastructure ITServices Media&Entertainment Metals&Mining MidCaps Oil&Gas Pharma PowerUtilities RealEstate

Summary
Contrarytotheexpectation,UnionBudget2012waslesssevereontheindustrydespiteitsfocuson revenuemobilisation. FY12performancehasbeencompletelyoffthetargetwithgovernmentmissingitsfiscaltargets.For FY13,ithasset5.1%asfiscaldeficittargetasagainstestimateof5.9%forFY12. Acrosstheboardhikeinservicetaxandexcisedutyratesisinflationaryandislikelytodelaythe interestratescut. AmendmentinTheIncomeTaxActtowidenthedefinitionofIncomedeemedtoaccruefromIndia withretrospectiveeffectisabigsetbacktoforeigninvestmentsintheIndianeconomy. Mobilisation fromtaxfreeInfrastructurebondshasbeendoubledtoRs600bn. IncreaseincustomsdutyonGoldisarightsteptochannelise domesticsavingsinproductiveassets. Successofgovernmentincontainingthesubsidyburdenwithinthetargetswillbecrucial.ForFY13, subsidyburdeniskeptatRs1,900bn,adeclineof12%.

AgricultureSector
Totalplannedoutlayhasbeenincreasedby18%fromRs171bninFY12toRs202bninFY13
Agricultureestimatedtogrowat2.5%inFY12. Interestsubventionschemeforprovidingshorttermcroploanstofarmersat7%interestperannum extendedtoFY13.Additionalsubventionof3%tocontinueforpromptpayment. ToallocateRs100bntoNABARDforrefinanceofRRBs enhancingtheircapacitytodisburseshortterm croploans. ThetotalallocationtoRashtriya Krishi Vikas Yojana (RKVY)isbeingincreasedfromRs78.6bninFY12to Rs92.2bninFY13. WiththeBringingGreenRevolutiontoEasternIndia (BGREI)generatingpositiveresults,theallocation forthisschemeincreasedfromRs4bntoRs10bninFY13. IthasbeenproposedtostartanewcentrallysponsoredschemetitledNationalMissiononFood Processing toboostthefoodprocessingsector. TargetofbankcredittoagricultureincreasedtoRs5,750bnfrom Rs4,750bn.

BankingandFinancialReforms
IntroductionofamendmentstotheFRBMActaspartofFinanceBill,2012 Mediumtermexpenditure frameworktosetforthathreeyearrollingtargetforexpenditureindicators. Endeavourtolimitcentralsubsidiesunder2%ofGDPinFY13;to befurtherbroughtdownto1.75%of GDPovernext3years. ProposestoprovideRs159bnforcapitalisation ofPublicSectorBanks,RegionalRuralBanksandother financialinstitutionsincludingNABARD. Examiningthepossibilityofcreatingafinancialholdingcompanywhichwillraiseresourcestomeetthe capitalrequirementsofPublicSectorBanks. ProposestomovevariousbillsintheBudgetSessionoftheParliamentrelatedtoMicroFinance, NationalHousingBank,SIDBI,NABARD,RegionalRuralBanks,IndianStampetc.Thisattemptstoroll forwardtheprocessoffinancialsectorlegislativereforms. TargetforagriculturalcreditraisedbyRs1,000bntoRs5,750bninFY13. Interestsubventionschemeforprovidingshorttermcroploanstofarmersat7%interestp.a.tobe continuedinFY13.Additionalsubventionof3%availableforpromptpayingfarmers. DTCtobeenactedattheearliestwhileGSTisstillatadiscussionstagebetweenstateandcentre.

CapitalMarketReforms
STTforcashdeliverytransactionshavebeenreducedby20%to0.1%. IntroductionofRajivGandhiEquitySavingScheme,whichwouldallowincometaxdeductionof50% tonewretailinvestorsinvestingupto Rs50,000directlyinequitiesandwhoseannualincomeisbelow Rs1mn.Theschemewillhavealockinperiodof3years. AllowingQualifiedForeignInvestors(QFIs)toaccessIndianCorporateBondmarket. SimplifyingtheprocessofIPOs,loweringtheircostsandhelpingcompaniesreachmoreretail investorsinsmalltowns.ProposaltomakeitmandatoryforcompaniestoissueIPOsofRs100mnand aboveinelectronicformthroughnationwidebrokernetworkofstockexchanges. Providingopportunitiesforwidershareholderparticipationinimportantdecisionsofthecompanies throughelectronicvotingfacilities,besidesexistingprocessforshareholdervoting,whichwouldbe mademandatoryinitiallyfortoplistedcompanies. Permittingtwowayfungibility inIndianDepositoryReceiptssubjecttoaceilingwiththeobjectiveof encouraginggreaterforeignparticipationinIndiancapitalmarket.

DirectTaxation
Individuals
ThebasicexemptionlimitofincometaxraisedtoRs200kfromRs180kwhichwillresultintotaltax savingofRs2k.Additionallytheupperlimitforthe20%bracket increasedfromRs800ktoRs1mnwhich wouldprovideanadditionalreliefofRs20kfortaxpayersinthisbracket. However,forfemaletaxpayersthebasicexemptionlimithasbeenraisedfromRs190ktoRs200kinline withmalecounterpartsandhencethebenefitwouldbeonlytothetuneofRs1k.
NewSlab UptoRs200,000 Rs200,001toRs 500,000 Rs 500,001toRs 1,000,000 Rs 1,000,001andabove Taxrate Nil 10% 20% 30%

Anadditionaldeductionofupto Rs10kforinterestfromsavingbankaccounts. Withintheexistinglimitfordeductionallowedforhealthinsurance,adeductionofupto Rs5kwouldbe permittedforpreventivehealthcheckup. ThegovernmenthasproposedtointroduceanewschemenamedRajivGandhiEquitySavingsScheme whichwouldallowforadeductionof50%forinvestmentsuptoRs50kinequitiesforindividualswith annualincomebelowRs1mn.

7

DirectTaxation
Corporate
Thereisnochangeincorporatetaxrate ThelevyofAlternateMinimumTax(MAT)hasbeenextendedtoall personsotherthancompanies claimingprofitlinkeddeductions. ThedefinitionofincomedeemedtoaccrueorariseinIndiahasbeenwidenedwithretrospectiveeffect fromApril1,1962.ThisissignificantconsideringtheSupremeCourtjudgmentintheVodafoneCase. Dividendfromforeignsubsidiaryatalowertaxrateof15%againstthefulltaxratetobepermittedfor afurtheroneyeari.e.upto March31,2013. IthasbeenproposedtoremovethecascadingeffectofDividendDistributionTax(DDT)inamultitier corporatestructure.Thisbenefitwascurrentlyavailableonlyinatwotiercorporatestructure. Theweighteddeductionof200%availableforinvestmentinresearchanddevelopmentinaninhouse facilitytobeavailableforafurtherfiveyearsbeyondMarch31,2012. ForSMEs,turnoverlimitforcompulsorytaxauditraisedfromRs6mntoRs10mn. Weighteddeductionattherateof150%onexpenditureincurredonskilldevelopmentin manufacturingsectorwouldbeavailableasperprescribedguidelines.
8

IndirectTaxation
ExciseDuty
StandardrateofCentralExciseDutyhasbeenincreasedfrom10% to12%. Excisedutyonlargecarshasbeenincreasedto24%from22%,andsimplifiedtoadvalorem27%oncars attractingmixedrateof22%+Rs15,000pervehicle Excisedutyondemeritgoods(certaincigarattes,bidis,panmasalas etc)raised,cess oncrudepetroleum producedinIndiaincreasedtoRs4,500/tonnefromRs2,500/tonne. Excisedutyonrefinedgoldhasbeenincreasedto3%,includinggoldproducedfromcoppersmelting Brandedsilverjewellery hasbeenexemptedfromexciseduty,whiledutyonsilverproducedfromcopper smeltinghasbeenreducedfrom6%to4% However,excisedutyonsoyafoodproducts,iodine,LEDlamps,aircrafttyreshavebeenreducedto6%

ServiceTax
StandardServiceTaxratehasbeenincreasedfrom10%to12% withaproposaltotaxallservices,except thoseinthenegativelistcomprisingof17headsandalistofexemptions. Utilizationofinputtaxcreditpermittedinnumberofservicestoreducecascadingoftaxes. Stepstakentoharmonise CentralExciseandServicetaxtobringthemcloserforeventualtransitiontoGST.

IndirectTaxation(Contd.)
CustomsDuty
PeakCustomsDutyratekeptunchangedat10%. However,reliefprovidedforspecificsector,especiallythoseunderstress Fullexemptionfromcustomduty(current5%)&aconcessionalCVDof1%tosteamcoaltillFY14 Fullexemptionforcoalminingprojectimports,reductionformineralprospectingmachineries. Fullexemptionforaircrafts&equipmentsimportedforthirdpartymaintenance,repair&overhaul. Reliefproposedtosteel(importdutyonflatproductshikedto7.5%),solarprojects(plants& machineryexemptedfromspecialCVD),textiles,health&nutrition(soya,iodine)andfewothers. Dutyfreeallowancesincreasedforeligiblepassengers. However,customdutyonGoldhasbeendoubled(to4%forstandardgold,10%fornonstandardgold and2%forgoldoreandconcentrate)tocheckthetrendofriseingoldimports.

10

Infrastructure Roadahead
XIIth PlaninvestmentininfrastructuretogouptoRs50tn Ministryhassetanambitioustargetofawarding8,800kmunderNHDPnextyear. AllocationtoRoadMinistryhasbeenincreasedby14%toRs254bn inFY13 Governmententerpriseshavebeenallowedtoraisetaxfreebonds ofRs600bn,100%increaseoverlast year. ECBhasbeenallowedforcapitalexpenditureonO&Mofroadsand highways,aslongastheyarepartof theoriginalproject. AllocationtoPradhan Mantri GramSadak Yojana hasbeenincreasedby20%YoYtoRs240bn. AllocationunderRuralInfrastructureDevelopmentFundenhanced(RIDF)toRs200bn,exclusively earmarkedRs50bnforcreatingwarehousingfacilities. TodeepenIndiancorporatebondmarket,QualifiedForeignInvestors(QFIs)areallowedtoinvestin market.

11

Socialspending Health&Education
Plannedsocialsectoroutlayup20.8%toRs1,789bn.
OutlayforNREGAschemedeclinedby17.5%toRs330bn. Ourcalculationsuggests,BharatNirman allocationhasbeenincreasedby16.3%toRs674bn Overallallocationforeducationincreasedby18%toRs615bn.Sarva Shiksha Abhiyan allocationup 21.7%toRs256bn. AllocationforScheduledCastesSubPlan(SCSP)andTribalSubPlan(TSP)hasbeenincreasedby18%and 17.6%toRs371bnandRs217.1bnrespectively. Middaymealschemeallocationincreasedby15%toRs119bn. AllocationforIntegratedChildDevelopmentServices(ICDS)hasbeenincreasedby58.5%toRs158.5bn. NationalRuralHealthMission(NRHM)allocationsincreasedby15%toRs208bn.

12

BudgetAllocationtoMajorSchemes
HighlightsofKeyPlans(Rs bn) BharatNirman MahatmaGandhiNREGS Indira Awaas Yojana (RuralHousing) Pradhan Mantri GramSadak Yojana (PMGSY) Sarva Shiksha Abhiyan (SSA) NationalRuralHealthMission(NRHM) Highways NHDP/NHAI IIFCLCum.Disbursementtarget NationalRuralLivelihoodMission NationalRuralDrinkingWaterProgramme RuralSanitation IntegratedWatershedManagementProgramme NationalProgramme ofMidDayMealsinSchools IntegratedChildDevelopmentServices ForHealthSector Creditsupporttofarmers InterestSubventiontofarmers Rashtriya Krishi Vikas Yojana 200708 120 40 65 107 110 117 65 18 65 11 11 73 200809 313 160 54 75 131 119 107 70 22 73 12 18 80 63 37 2,870 200910 454 391 88 120 131 139 116 86 90 24 80 12 19 80 67 44 3,250 201011 480 401 100 120 150 154 167 95 200 30 90 16 25 94 87 56 3,750 5% 201112 580 400 100 200 210 181 133 103 250 29 94 17 25 104 100 57 4,750 7% 78 201213 674 330 111 240 256 208 209 115 39 105 35 31 119 159 5,750 7% 92 YoY (%) 16.3 (17.5) 10.8 20.0 21.7 14.9 57.0 10.9 34.4 12.3 112.1 19.7 15.0 58.5 21.1 18.0

13

GovernmentReceipts
Receipts
(InRs bn) RevenueReceipts Growth% TaxRevenue Growth% NonTaxRevenue Growth% CapitalReceipts Growth% OtherReceipts Growth% Borrowings&Liabilities Growth% TotalReceipts Growth% FY09 5,403 (0.3) 4,433 0.9 969 (5.3) 3,437 101.2 67 (84.7) 3,370 165.5 8,840 24.0 FY10 5,728 6.0 4,565 3.0 1,163 19.9 4,517 31.4 332 395.1 4,185 24.2 10,245 15.9 FY11 7,885 37.6 5,699 24.8 2,186 88.0 4,089 (9.5) 353 6.2 3,736 (10.7) 11,973 16.9 FY12BE 7,899 0.2 6,645 16.6 1,254 (42.6) 4,678 14.4 550 56.0 4,128 10.5 12,577 5.0 FY12RE 7,670 (2.7) 6,423 12.7 1,247 (42.9) 5,517 34.9 298 (15.6) 5,220 39.7 13,187 10.1 FY13BE 9,357 22.0 7,711 20.1 1,646 32.0 5,552 0.6 417 40.0 5,136 (1.6) 14,909 13.1

14

GovernmentExpenditure&Deficit
GovernmentExpenditure
(InRs bn) NonPlanExpenditure Growth% OnRevenueAccount Growth% OnCapitalAccount Growth% FY09 6,087 19.9 5,590 32.8 497 (42.7) FY10 7,211 18.5 6,579 17.7 632 27.1 FY11 8,183 13.5 7,265 10.4 918 45.3 FY12BE 8,162 (0.3) 7,336 1.0 826 (10.0) FY12RE 8,921 9.0 8,157 12.3 764 (16.8) FY13BE 9,699 8.7 8,656 6.1 1,043 36.6

PlanExpenditure Growth% OnRevenueAccount Growth% OnCapitalAccount Growth%

2,752 34.2 2,348 35.3 405 28.4

3,034 10.2 2,539 8.1 495 22.4

3,790 24.9 3,142 23.8 648 30.9

4,415 16.5 3,636 15.7 779 20.3

4,266 12.6 3,462 10.2 804 24.1

5,210 22.1 4,205 21.5 1,005 25.0

15

GovernmentExpenditure&Deficit
Deficit
(InRs bn) RevenueDeficit RevenueDeficit(%ofGDP) FiscalDeficit FiscalDeficit(%ofGDP) FY09 2,535 4.5 3,370 6.0 FY10 3,390 5.2 4,185 6.5 FY11 2,523 3.3 3,736 4.9 FY12BE 3,073 3.4 4,128 4.6 FY12RE 3,950 4.4 5,220 5.9 FY13BE 3,504 3.4 5,136 5.1

MajorExpenseHeads
Interest Growth% Defence Growth% Subsidies Growth% 1,922 12.4 1,142 24.6 1,297 82.9 2,131 10.9 1,418 24.1 1,414 9.0 2,340 9.8 1,541 8.7 1,734 22.7 2,680 14.5 1,644 6.7 1,436 (17.2) 2,756 17.8 1,709 10.9 2,163 24.7 3,198 16.0 1,934 13.1 1,900 (12.2)

16

Sectoral ImpactAnalysis

17

Automobiles
Proposals
ExciseDutyapplicableonautomobilesrevisedasfollowing: TwoWheelers: ExistingRevised Motorcycle/Scooter/Mopeds10%12% Petrol/LPG/CNGVehicles: ExistingRevised a.Length<4mtr&enginecapacity<1,200cc10% 12% b.Length>4mtr&enginecapacity<1,500cc22% 24% c.Length>4mtr&enginecapacity>1,500cc22%+Rs15k27% DieselVehicles: Existing Revised a.Length<4mtr&enginecapacity<1,500cc10% 12% b.Length>4mtr&enginecapacity<1,500cc22% 24% c.Length>4mtr&enginecapacity>1,500cc22%+Rs15k27% Additionalexcisedutyonchassischangedfromaspecificdutyof Rs10kperchassisto3%advalorem Customsdutyonimportedvehicles(CBUs)withavalue exceedingUSD40kincreasedfrom60%to75%advalorem Theweighteddeductionof200%forR&Dexpenditureinanin housefacilityhasbeenextendedforafurtherperiodoffiveyears
vineet.hetamasaria@pinc.co.in +912266186388 nikhil.deshpande@pinc.co.in +912266186339 tasmai.merchant@pinc.co.in +912266186377

Neutral
Impact PINCComments
The 200bps increase in basic excise duty is inlinewithexpectationandOEMswouldbe able to pass on the same to customers. Excisedutyonlargevehiclesi.e.withengine capacity above 1,500cc has been increased from 22% plus a specific duty of Rs15k to 27%.However,consideringtheaffordability factorforlargevehiclestheimpactwouldbe minimal. Additionally, no special levy on dieselvehiclesispositivefortheautomobile industry. The move is positive for Maruti SuzukiandMahindra&Mahindra. Nosignificantimpactformanufacturers. Importedvehiclestogetcostlier.This wouldboostimportofcompletelyknocked downkits(CKDs)andassemblyinIndia. R&Dbenefitsforcompaniestocontinue.

18

Cement
Proposals
Excisedutystructureoncementrevisedasfollows: ForMinicementplants: Existing Revised a.MRP<Rs190/bag10%6%+Rs120/mt b.MRP>Rs190/bag10%+Rs30/mt6%+Rs120/mt OtherthanMiniCementPlant: Existing Revised a.MRP<Rs190/bag10%+Rs80/mt12%+Rs120/mt b.MRP>Rs190/bag10%+Rs160/mt12%+Rs120/mt Excisedutyonclinkerchangedfrom10%advaloremplus Rs200/mtto12%advalorem Basiccustomsdutyonimportedcoalreducedfrom5%to nil.CVDisbeingreducedfrom5%to1%.

Positive

Impact PINCComments
Themethodofcalculationforexcisedutyhas beenchangedfromtransactioncostbasisto retailsalepricealongwith anabatementof30%. Theexcisedutyisexpectedtomarginallyinch upwardsby~Rs2/bag.

Sincetheexcisedutyiscenvatable forthe organised playersitwouldnotaddtothecost. Beneficialforcementmanufacturersdependent onimportedcoalsuchasIndiaCements,Madras CementsandAmbujaCements.

vineet.hetamasaria@pinc.co.in +912266186388 nikhil.deshpande@pinc.co.in +912266186339 tasmai.merchant@pinc.co.in +912266186377

19

Fertiliser
Proposals
Govt.emphasises onachievingselfsufficiencyin Ureainnext5yearsthroughnewinvestments. Benefitsofinvestmentlinkeddeductionincreased from100%to150% CapitalinvestmentinFertiliser sectoreligiblefor VGF(viabilitygapfunding) Exceptionofbasicdutyof5%onimportof equipmentsforfertiliser expansionprojects Govt.emphasisonhigherusageofSSP Reductioninbasiccustomdutyonsomewater solubleandliquidfertilisers from7.5%to5%and from5%to2.5% Revisedfertiliser subsidyforFY12isRs672bnand budgetedforFY13isRs609bn Plansfortrackingfertilisers movementthrough mobiletocurbleakagesanddirecttransferofcash subsidytoretailersandfarmers
satish.mishra@pinc.co.in +912266186488 urvashi.biyani@pinc.co.in +912266186334

Positive
Impact PINCComments
PositiveforplayerslookingfornewUreainvestment, ChambalFertilisers,RCF,TATAChemicalstobenefit (Benefitsofsection35ADofincometaxact) PositiveforplayerslookingfornewUreainvestment; ChambalFertilisers,RCF,TATAChemicalstobenefit PositiveforplayerslookingfornewUreainvestment; ChambalFertilisers,RCF,TATAChemicalstobenefit PositiveforplayersincreasingSSPcapacity;Chambal Fertilisers,Coromamdel Inter.tobenefit Positiveforplayersinvolvedintradinginthese fertilisers.ToimpactallmajorFertiliser players, however,onlytoamarginalextent Actualsubsidyislikelytobehigherforboththeyears, hencetheremaybedelayinsubsidypayment Noimmediateimpact,implementationisdifficultand willtaketime

20

FMCG
Proposals
Imposeda10%AdValoremdutyoncigarettes(in addition of the current excise duty structure) of more than 65mm length chargeable on 50% of theMRP.

Positive

Impact PincComments
a.Webelieve,ITCwouldhavetotake~5%hikeinthe cigarette MRP to mitigate the extra excise duty burden. With strong cigarette pricing power, we believeITCwouldcomfortablypassonthisextracost. Wemaintainourvolumegrowth assumption for FY13 andFY14. b. On account of the change in the cigarette slab, ITC canlaunch65mmcigarettetoowheretheexciseduty rate is similar at Rs669/1000 cigarette which was earlierfor60mmcigarette.

Credit flow for farmers raised by 21% to Rs5,750bn

PositivefortheFMCGbusinessasitwouldsupportthe ruralincome.ItwouldbenefitDabur,Jyothy,HULand GodrejConsumeronhigherrevenuecontributionfrom theruralIndia.

naveent@pinc.co.in +912266186384

21

Infrastructure
Proposals
AmbitofViabilityGapFundinghasbeenexpandedto coverIrrigation,Oil&Gas/LNGstoragefacilities,Oil& Gaspipeline,terminalmarkets,capitalinvestmentin fertiliser sector RaisingtaxfreebondshasbeendoubledtoRs600bn Extendingexemptionfromimportdutyonspecified equipmentinroadconstructionandtunnelboring machinesfromNHAIandStategovernmentprojects toMetropolitanDevelopmentAuthorities.

Positive
Impact PINCComments
IncreasesopportunityforEPCplayersand developers

Wouldaddressfundingforkeysectors.Takeout financingwillfurtherbestrengthenedthroughIIFCL WillmarginallybenefiturbanEPCplayerslikeJ KumarInfraprojects,CCCL,PatelEngg,Sadbhav Engg,HCC.

vinod.nair@pinc.co.in +912266186379 subramaniam.yadav@pinc.co.in +912266186371

22

ITServices
Proposals
NochangeinMATapplicableonunitsoperating inaSEZandnoextensionofSEZbenefits. Noclarityontaxationofonsiterevenuesand refundofservicetaxpaidoninputsliketelecom facilities,transportationandsoftwareupgrades

Neutral

Impact PINCComments
EffectivetaxrateestimatesforFY12andFY13already factorinthecurrenttaxexemptionrules. Asexpectednoclarificationontheseissueshavebeen providedinthebudget.Claimsforservicetaxrefunds ofmanyITcompaniestothetuneofRs35bn(asper mediareports)arelongpendingwiththerevenue department. PositiveforITcompanieswithdomesticexposurelike CMC,WiproInfotech,MindTree,HCLInfosystems, Redington,Glodyne,Vakrangee.

Allocationof funds to complete 40crs additional AADHAR enrollments (UID) and proposed implementationof systems like payments under MGNREGA & pensions and disbursal of PDS, fertilisers & LPG subsidies using AADHAAR as backbone.

rohit.anand@pinc.co.in +912266186372 niraj.garhyan@pinc.co.in +912266186382

23

Media&Entertainment
Proposals
NoreductionincustomdutyonSetTopBoxes. Customdutytoremainat5%.

Neutral

Impact PINCComments
NoreliefforcableoperatorsandDTHplayersasthe customdutyonSTBs remainsthesame.Costtothe DTHandcableoperatorstobeatthesamelevelas earlier. Theproposalwillbenefitthefilmmakersand producers.

Exemptionofservicetaxoncopyrightsrelatingto recordingofcinematographicfilms.

Namrata.sharma@pinc.co.in +912266186412 Sakshee.chhabra@pinc.co.in +912266186516

24

Metals&Mining
Proposals
StandardExcisedutyraisedfrom10%to12% CustomdutyonHRCraisedfrom5%to7.5% Customdutyonthermalcoalreducedfromearlier 5%to0%andCVDfrom5%to1% Customdutyonpelletplantequipmentreduced from7.5%to2.5% Customdutyoncoatingmaterialformanufactureof electricalsteelequipmentreducedfrom10%to5% Customdutyonmachineryandequipmentsfor surveyingandprospectingreducedfrom10%or 7.5%to2.5% SpecialCVDonplantandequipmentforsettingup solarthermalprojectsisfullyexempted
bikash.bhalotia@pinc.co.in +912266186387 harleen.babber@pinc.co.in +912266186389 dipti.vijaywargi@pinc.co.in +912266186393

Positive

Impact PINCComments
Likelytoimpactthedemandformetalsorforcethe companiestoreduceprices,impactingmargins. PositivefordomesticflatsteelproducerslikeTataSteel, SAIL,JSWSteel,Bhushan Steeletc. Positiveforspongeironbasedsteelmakers(Jindal Steel andPower,MonnetIspat,Godawari Power)and aluminium smeltersmainlyHindalco andNALCO. Positiveforcompaniesfocusingonrampinguppellet capacity Jindal SteelandPower,MonnetIspat and Power,Godawari Power,UshaMartin,JSWSteel. PositiveforJSWSteel,whoplanstosetup0.6mntpa electricalsteelcapacity. Positiveforironoreminersandmetalcompanieshaving captivemines. Positiveforcompaniessettingupsolarpowerprojects likeGodawari Power.
25

MidCaps
Proposals
Theexciseexemptionlimitavailabletononleatherfootwearis beingincreasedtoRs500.ForfootwearexceedingRs500,the applicabledutywouldbe12%.PreviouslyitwasRs0250(nil),Rs250 750(8%)andaboveRs750(10%). NoantidumpingdutyhasbeenleviedonSodaAsh(statusquo). BudgetallocationforMISandrelatedactivitieshasbeenincreased toRs3,087bn(FY13)fromRs2,528bn(FY12revisedbudgetestimate). Targetforagriculturalcreditin201213raisedbyRs1,000bnto Rs5,750bntoensuretimelyaccesstoaffordablecreditforfarmers. Asperthebudgetaryproposals,theinterestsubventionschemefor providingshorttermcroploanstofarmersat7%interestwillbe continuedin201213.Anadditionalsubventionof3%willbe availabletopromptpayingfarmers. 4,000residentialquarterstobeconstructedforCentralArmed PoliceForces.6,000schoolstobesetupatblocklevelasmodel schoolsinthe12thPlan

Positive

Impact

PINCComments
Thisismarginally+ve forBATAasitsaverage sellingpriceforfootwearis<Rs500.30%of Batasrevenuecomesfromnonleather segment. +ve forHSILwhichimportsSodaash. ThiswillbeaboosttoentireMISsegment andwillbenefitJainIrrigation. Improvementinfinancingtofarmerswill improveconsumptionofMISproducts benefitingJainIrrigation.

ThiswillbenefitSintex whichoperatesinthe PrefabandMonolithicsegments.

suman.memani@pinc.co.in +912266186479 abhishek.kumar@pinc.co.in +912266186378

26

Oil&Gas
Proposals
IncreaseinCESSondomesticcrudeoilfromRs2500/mtto Rs4500/mt LNGstoragefacilitiesandOil&Gaspipelineseligiblefor VGF(ViabilityGapfunding) Importdutyexemptiononnaturalgasfrom5%tonilfor powergeneration

Neutral

Impact PINCComments
NegativeforUpstreamplayers(ONGC,RIL, CairnandOIL) Itwillattractnewinvestmentinsectorand helpupcomingprojectsforGAIL,GSPL, Petronet LNG LNGcosttoreduceby$0.4$0.5/mmbtu.No directimpactonPetronet (passthroughcost), howeverwillspurLNGdemandtoasmall extent(LNGformsonly9%oftotalGasfor powerasonFY11) PositiveinlongtermforOilsectorasitwill preventleakageandthusreducesubsidy Govt.contributionforFY12is~50%oftotal underrecovery,howeverFY13guidanceis lowerconsideringthecurrentsituation

DirecttransferofsubsidyforkeroseneandLPGintothe bankaccountofbeneficiaries SubsidyAllocationonpetroleumproductsforFY13at Rs436bnvs FY12allocationofRs685bn

satish.mishra@pinc.co.in +912266186488 urvashi.biyani@pinc.co.in +912266186334

27

Pharma
Proposals
LevyofMinimumAlternateTax(MAT)onall personsotherthancompanies,claimingprofit linkeddeductions. Theweighteddeductionof200%forR&D expenditureinaninhousefacilityextended furtherforaperiodoffiveyears. AllocationforNRHMproposedtobeincreased fromRs181.2bnin201112toRs208.2bnin2012 13.

Negative

Impact PINCComments
Thiswouldbehighlynegativeforcompaniesoperating domesticbusinessunderthepartnershipbasedmodel. NegativeforSunPharmaandCadila Healthcare. Positiveforthesectoringeneral.

Positiveforthesectoringeneral.

ExcisedutyonAPIhasbeenincreasedfrom10% to12%.Whilerateonformulationshasbeen increasedfrom5%to6%.

Theincreaseinexciseratewouldbeapasson. HowevertheriseinAPIexciseratewouldcontinueto leadtoaccumulationofcenvat credit.

sushant.dalmia@pinc.co.in +912266186462 poonam.sanghavi@pinc.co.in +912266186709

28

PowerUtilities
Proposals
Abolition of customs duty on steam coal and LNG. CVD reduced to 1% from 5% on steam coal. Both thesereductionswillbeavailabletillFY14 Full exemption from basic customs duty on coal miningprojects Nonimpositionofimportdutyonpowerequipments AllowedtopartfinanceRupeedebtofexistingpower projects via ECB. Rate of withholding tax on interest paymentonECBreducedto5%from20%for3years 80IAbenefitsextendedbyoneyear

Positive
Impact PINCComments
Positive for players consuming imported fuel and selling power on Case I and/or merchant market. Adani Power and JSW Energy to be the biggest beneficiaries Positive for Coal India as cost of imported mining equipmentswillbelower Positive for power sector as their capital cost will notrise Positiveforthesectorasfundingwillbecomeeasier

Positive for players whose capacities will commission in FY13. Some of the beneficiaries are NTPC (3.9GW), Adani Power (3.3GW) and JSW Energy(540MW)

Easieraccesstofunds,extensionof80IAandavailabilityofcheaperfuelshouldencouragecontinuedinvestmentsinthepower sector. This will benefit power equipment suppliers and EPC players. However, no customs duty on imported equipments is a negativefordomesticplayerslikeBHEL,L&T,BGR,Thermax,JSWEnergyandBharatForge.
hitul.gutka@pinc.co.in+91226618410 vinod.nair@pinc.co.in+912266186379 ankit.b@pinc.co.in+912266186551 madhura.joshi@pinc.co.in+912266186395

29

RealEstate
Proposals
Interestsubventionof1percentonhousingloans upto Rs1.5mnextendedforonemoreyearfor housepropertycosting<Rs2.5mn ECBallowedinaffordablesegment.Also, withholdingtaxonaffordablehousingtobeat thereducedrateof5% Provisionsunderruralhousingfundincreasedto Rs40bnfromRs30bn. TDSintroducedat1%fortransferofimmoveable propertyasperITActsec194LAA.TDSwillbe deductedbythebuyerwhilemakingpaymentto seller.Exemptiongivenwheretheconsideration islessthanRs2mn(orRs2.5mnforcertain specifiedareas)

Neutral

Impact PINCComments
KeyplayerslikelytobenefitarePuravankara,HDILand Unitech (Uni Homes). KeyplayerslikelytobenefitarePuravankara,HDILand Unitech (Uni Homes). WeseeGovernmentmovetowardsbuildingrural housingandfillinghousingshortages. Wedonotseeanyimpactonthelistedplayersdueto this.

suman.memani@pinc.co.in +912266186479 abhishek.kumar@pinc.co.in +912266186378

30

Equity Desk
EquityDesk
SadanandRaje Head InstitutionalSales TechnicalAnalyst

TEAM
sadanand.raje@pinc.co.in 912266186366

Research
VineetHetamasaria,CFA NikhilDeshpande TasmaiMerchant VinodNair AnkitBabel HitulGutka SubramaniamYadav Madhura Joshi SatishMishra Urvashi Biyani NaveenTrivedi Rohit KumarAnand Niraj Garhyan NamrataSharma SaksheeChhabra BikashBhalotia HarleenBabber Dipti Vijaywargi SushantDalmia,CFA PoonamSanghavi SumanMemani Abhishek Kumar CKrishnamurthy HeadofResearch,Auto,Cement Auto,AutoAncillary,Cement Auto,AutoAncillary,Cement Construction,Power,CapitalGoods CapitalGoods,Engineering Power Construction Power Fertiliser,Oil&Gas Fertiliser,Oil&Gas FMCG ITServices ITServices Media Media Metals,Mining Metals,Mining Metals,Mining Pharma Pharma RealEstate,Midcaps RealEstate,Midcaps TechnicalAnalyst Equities Equities Equities Derivatives Derivatives vineet.hetamasaria@pinc.co.in nikhil.deshpande@pinc.co.in tasmai.merchant@pinc.co.in vinod.nair@pinc.co.in ankit.b@pinc.co.in hitul.gutka@pinc.co.in subramaniam.yadav@pinc.co.in madhura.joshi@pinc.co.in satish.mishra@pinc.co.in urvashi.biyani@pinc.co.in naveent@pinc.co.in rohit.anand@pinc.co.in niraj.garhyan@pinc.co.in namrata.sharma@pinc.co.in sakshee.chhabra@pinc.co.in bikash.bhalotia@pinc.co.in harleen.babber@pinc.co.in dipti.vijaywargi @pinc.co.in sushant.dalmia@pinc.co.in poonam.sanghavi@pinc.co.in suman.memani@pinc.co.in abhishek.kumar@pinc.co.in krishnamurthy.c@pinc.co.in rajeev.gupta@pinc.co.in ankur.varman@pinc.co.in himanshu.varia@pinc.co.in shaileshk@pinc.co.in ganeshg@pinc.co.in amar.margaje@pinc.co.in ashok.savla@pinc.co.in sajjid.lala@pinc.co.in rajub@pinc.co.in hasmukhp@pinc.co.in dhirenpurig@pinc.co.in arjun.prajapti@pinc.co.in gaurangg@pinc.co.in hemangg@pinc.co.in ketang@pinc.co.in HeadCompliance rakeshb@pinc.co.in 912266186388 912266186339 912266186377 912266186379 912266186551 912266186410 912266186371 912266186395 912266186488 912266186334 912266186384 912266186372 912266186382 912266186412 912266186516 912266186387 912266186389 912266186393 912266186462 912266186709 912266186479 912266186398 912266186747 912266186486 912266186380 912266186342 912266186349 912266186347 912266186327 912266186321 912266186337 912266186322 912266186325 912266186345 912266186346 912266186400 912266186400 912266186400 912266186400

SALES
RajeevGupta Ankur Varman HimanshuVaria Shailesh Kadam Ganesh Gokhale

DEALING
Amar Margaje AshokSavla Sajjid Lala Raju Bhavsar Hasmukh D.Prajapati Dhirenpuri D.Goswami Arjun Prajapati

DIRECTORS
Gaurang Gandhi HemangGandhi Ketan Gandhi

COMPLIANCE
RakeshBhatia

Infinity.com
bright thinking
Financial Securities Ltd
Small World, Infinite Opportunities

Member : Bombay Stock Exchange & National Stock Exchange of India Ltd. : Sebi Reg No: INB 010989331. Clearing No : 211 1216, Maker Chambers V, Nariman Point, Mumbai - 400 021; Tel.: 91-22-66186633/6400 Fax : 91-22-22049195
Disclaimer: This document has been prepared by the Research Desk of M/s Infinity.com Financial Securities Ltd. (PINC) and is meant for use of the recipient only and is not for public circulation. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors The information contained herein is obtained and collated from sources believed reliable and PINC has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The opinion expressed or estimates made are as per the best judgement as applicable at that point of time and PINC reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval PINC, its affiliates, their directors, employees and their dependant family members may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of PINC. The views expressed are those of analyst and the PINC may or may not subscribe to all the views expressed therein This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions Neither PINC, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Copyright in this document vests exclusively with PINC and this document is not to be reported or circulated or copied or made available to others.

OurreportsarealsoavailableonReuters,ThomsonPublishersandBloombergPINV<GO>