UnionBudget-Feb01 17
UnionBudget-Feb01 17
UnionBudget-Feb01 17
Centrally
Non debt sponsored
Borrowing and Other
capital, 3% scheme, 10%
other expenditure, 13%
liabilities, 19%
Corporation
tax, 19% Central sector
Scheme, 11%
States share in
Non tax tax and
revenue, 10% duties, 24%
interest
payments, 18%
Income tax, 16%
Service tax, 10% Finance
commision and
transfers, 5% Defense, 9%
Customs , 9% Union Excise Subsidies, 10%
Duties, 14%
Source: India Budget, Sharekhan Research Source: India Budget, Sharekhan Research
Gross tax revenue and Tax as % of GDP Fiscal deficit movement and FD as % to GDP
17,000 12.0
5.4
13,000 11.0
5,000 4.4
9,000 10.0
3.4
5,000 9.0
Source: India Budget, Sharekhan Research Source: India Budget, Sharekhan Research
Tax and Non-tax revenue movement Gross and Net market borrowings
14,000 6,000
80.0
12,000 5,000
10,000 4,000
70.0
8,000 3,000
6,000 2,000
60.0
4,000 1,000
2,000 0 50.0
FY18BE
FY14
FY15
FY16
FY17RE
0
FY14 FY15 FY16 FY17RE FY18BE
Net tax revenues ('00 Cr) Non-tax revenues ('00 Cr) Gross debt market borrowings ('00) Net debt market borrowings ('00) net as % of gross borr
Source: India Budget, Sharekhan Research Source: India Budget, Sharekhan Research
• In the Union Budget for FY2017-2018, the government has announced an average excise duty hike of 6% on
cigarettes, which is less than our as well as street expectation of 8-10% increase.
• For ITC, the weighted average excise duty hike stands at 6%. We expect ITC to pass on the excise duty hike
through an average price increase of 6-8% in its cigarette portfolio in the coming months (ITC had recently
increased prices of some brands).
• With the second consecutive year of moderate hike in the excise duty on cigarettes, we expect ITC’s cigarette
volume to grow by 6-7% in FY2018 (the previous volume growth expectation was 5%). This would result in
a 2-3% increase in the earnings estimate for FY2018, while we broadly maintain our earnings estimate for
FY2019. But, any significant increase in the tax rate on cigarettes under the impending GST regime (likely
implementation in July 2017) would act as a key risk to our volume growth estimates for ITC.
• The second consecutive year of moderate excise duty hike on cigarettes is positive for ITC, as its cigarette
volume is likely to improve and would further have a positive impact on the company’s cash flows in the near
term. Any significant increase in the tax rate on cigarettes under the GST dispensation will remain a key
monitorable in the coming quarters. The ITC stock is currently trading at 25.5x and 22.3x its FY2018E and
FY2019E earnings. We maintain our ‘Buy’ recommendation on the stock.
Cigarettes filter>
4,163.5 4,414.5 6.0 6.0%
85 mm
Sectoral analysis
Overall Key companies to be
Sector Key announcements
impact affected
Budget impact: Neutral
Sector view: Positive (preferred picks: Maruti Suzuki India, TVS Motor and Exide Industries)
Automobiles Total allocation of funds for Rural and Agricultural & Positive Increased rural sector
Allied sectors has increased by 24% to Rs1,87,223 crore. allocation would boost
rural income, which in
turn would have a positive
rub-off on rural-focused
companies such as Hero
MotoCorp Mahindra &
Mahindra and Escorts.
Allocation for Highways increased to Rs64,900 crore Positive This will result in better
from Rs57,976 crore. road connectivity, which
in turn will boost the
Commercial Vehicle (CV)
sales. Positive for Ashok
Leyland, Tata Motors and
Eicher Motors.
Budget impact: Positive
Sector view: Positive (preferred picks: UPL, PI Industries and Insecticides India)
Agri - Inputs Total allocation for Rural and Agricultural & Allied Positive UPL, Dhanuka Agri, PI
sectors for FY2018 has increased by 24% to Rs1,87,223 Industries and Insecticides
crore (with committed efforts of doubling the income of India
farmers in five years).
Emphasis on irrigation through a Dedicated Micro Positive Jain Irrigation and EPC
Irrigation Fund of Rs5,000 crore in NABARD. Industrie.
The customs duty on imported Liquefied Natural Gas Positive Chambal Fertilisers, GSFC,
(LNG), which is one of the key inputs for fertiliser RCF and NFL.
manufacturing cut from 5% to 2.5%.
Budget impact: Budget impact: Positive for gas utilities and downstream companies; negative for upstream PSUs
Sector view: Positive (preferred picks: RIL, IOCL and Petronet LNG)
Customs duty on LNG imports reduced to 2.5% from 5% Positive Petronet LNG, IGL,
currently. Gujarat Gas and GAIL.
No customs duty on crude oil imports. Positive IOCL, BPCL, HPCL,
RIL, MRPL and Chennai
Petroleum.
No reduction in cess rate on oil. Negative ONGC, Oil India and Cairn
India.
Fuel subsidy provision at Rs25,000 crore (LPG - Rs16,076 Neutral ONGC and Oil India.
crore and Kerosene - Rs8,924 crore) for FY2018 factors
Oil & Gas in crude oil price of $55/bbl, assuming a price hike per
month of Rs0.5/litre on Kerosene and Rs2/cylinder on
LPG till April 2017.
Creation of an integrated public sector oil major. Positive ONGC, Oil India, IOCL,
(given the BPCL and HPCL.
synergies but
implementation
seems difficult)
Set up facilities for Strategic Crude Oil Reserves at
Chandikhole in Odisha and Bikaner in Rajasthan.
Contd...
Sectoral analysis
Overall Key companies to be
Sector Key announcements
impact affected
Budget impact: Positive
Sector view: Positive (prefered picks: IRB Infrastructure, IL&FS Transportation, L&T, Gayatri Projects and Ashoka Buildcon)
Increased total allocation for infrastructure development Postive IRB Infrastructure, ITNL,
in FY2018 to Rs3,96,135 crore from Rs3,48,952 crore in L&T, Ashoka Buildcon,
BE FY2017. Gayatri Projects, Sadbhav
Engineering and KNR
Construction among
others.
In the road sector, budget allocation for highways has Postive IRB Infrastructure, ITNL,
increased from Rs57,976 crore in BE FY2017 to Rs64,900 L&T, Ashoka Buildcon,
crore in FY2018. 2,000 kms of coastal connectivity roads Gayatri Projects, Sadbhav
have been identified for construction and development. Engineering and KNR
Construction among
others.
MAT/AMT credit is allowed to be carried forward up to a Postive IRB Infrastructure, ITNL,
period of 15 years instead of 10 years at present. To take L&T, Ashoka Buildcon,
effect from April 1, 2018 onwards. Gayatri Projects, Sadbhav
Engineering and KNR
Construction among
Infrastructure others.
A new Metro Rail Policy and act with greater private Postive L&T and J Kumar
sector participation. Infraprojects.
Select airports in Tier 2 cities will be taken up for Postive GMR Infrastructure and
operation and maintenance in the PPP mode. GVK Infraprojects.
An amendment bill as part of the Arbitration and Postive IRB Infrastructure, ITNL,
Conciliation Act 1996 will be introduced to streamline L&T, Ashoka Buildcon,
institutional arrangements for resolution of disputes in Gayatri Projects, Sadbhav
infrastructure related construction contracts, PPP and Engineering and KNR
public utility contracts. Construction among
others.
Land monetisation and railway station redevelopment - Positive NBCC.
Amendment to the Airport Authority of India Act to enable
effective monetisation of land assets. The resources so
raised will be utilised for airport upgradation. However,
25 railway stations are expected to be awarded for
redevelopment during FY2018.
Budget impact: Positive
Sector view: Neutral
Affordable housing to be given infrastructure status. Positive DLF, Ashiana Housing,
Godrej Properties,
Century Plyboards,
Kajaria Ceramics, Cera
Sanitaryware and Somany
Ceramics.
Under the scheme for profit-linked income tax deduction Positive DLF, Ashiana Housing and
for affordable housing, carpet area instead of built up Godrej Properties.
area of 30 sq mtr and 60 sq mtr will be counted. 30 sq
mtr to apply only in case of municipal limits of 4 metro
cities and for the rest it will be 60 sq mt. To take effect
Real Estate
from April 1, 2018 onwards.
Reduction in the holding period for computing long-term Neutral DLF, Ashiana Housing and
capital gains for transfer of immovable property from Godrej Properties.
3 years to 2 years. Also, the base year for indexation is
proposed to be shifted from April 1, 1981 to April 1, 2001
for all classes of assets, including immovable property.
To take effect from April 1, 2018 onwards.
To reduce the period of holding from the existing 36 Positive DLF, Ashiana Housing and
months to 24 months in case of immovable property, Godrej Properties.
being land or building or both, to qualify as long term
capital asset. To take effect from April 1, 2018 onwards.
Contd...
Sharekhan 6 February 01, 2017 Home Next
Budget Special Union Budget (2017-18)
Sectoral analysis
Overall Key companies to be
Sector Key announcements
impact affected
The capital gains tax to the owner shall be chargeable Positive Godrej Properties and
to the income-tax as income of the previous year, Asiana Housing.
whereby the CC is issued as against the year in which
the possession of immovable property is handed over
to the developer for development of a project. To take
effect from April 1, 2018 onwards. In case any monetary
consideration is payable under the specified agreement,
tax at the rate of 10% shall be deductible from such
payment. This amendment will take effect from April
1, 2017.
Real Estate Tax on notional rental income for constructed buildings Positive DLF and Godrej
will apply only one year of the end of the year in which Properties.
completion certificate is received. To take effect from
April 1, 2018.
The National Housing Bank will refinance individual Positive DLF, Ashiana Housing and
housing loans of about Rs20,000 crore in FY2018. Godrej Properties.
Allocation for the Pradhan Mantri Awaas Yojana - Gramin Positive DLF, Ashiana Housing and
increased from Rs15,000 crore in BE FY2017 to Rs23,000 Godrej Properties.
crore in FY2018 with a target to complete 1 crore houses
by 2019 for the homeless and those living in kutcha
houses.
Budget impact: Neutral
Sector view: Neutral
A specific programme for the development of multi- Positive Container Corporation of
Logistics modal logistics parks, together with multi modal India, Gateway Distriparks
transport facilities, will be drawn up and implemented. and Allcargo Logistics.
Budget impact: Positive
Sector view: Positive (preffered picks UltraTech and The Ramco Cements)
Increased allocation in Infrastructure and sops for Positive UltraTech, Shree Cement
Affordable Housing. and The Ramco Cements.
Cement & Cement Products
Increased allocation for Rural and Agriculture & Allied Positive UltraTech, Shree Cement
sectors at Rs187,223 crore. and The Ramco Cements.
Budget impact: Positive
Sector view: Selective (preffered picks: HUL, ITC, Emami, GCPL & Jyothy Laboratories)
Focus on rural development: with focus on improving Positive Increase in allocation
rural infrastructure, the government has increased under various schemes
allocation on various schemes such MNREGA, besides for rural development
aiming for a smooth flow of agriculture credit and is positive for FMCG
funding under various irrigation schemes. companies such as HUL,
ITC, Emami, Godrej
Consumer Products (GCPL)
and Jyothy Laboratories
etc.
Relief to salaried individuals: The existing rate of Positive This will be beneficial
taxation for individual assesses falling under the income for FMCG and Consumer
slab of Rs2.5 lakh to Rs5 lakh reduced to 5% from the Discretionary sectors
Consumer Goods &
present rate of 10%. (including Apparels and
Discretionary
Travel & Tourism), as this
will lead to more money
in the hands of individuals
to spend. Positive for
Kewal Kiran Clothing,
Relaxo Footwears, Thomas
Cook India and Wonderla
Holidays etc.
Increase in basic customs duty on cashew nuts (roasted, Negative Marginally negative
salted or roasted & salted) from 30% to 45% for companies such as
Britannia, ITC (food
business) and others.
Contd...
Sharekhan 7 February 01, 2017 Home Next
Budget Special Union Budget (2017-18)
Sectoral analysis
Overall Key companies to be
Sector Key announcements
impact affected
No increase in Service Tax (kept unchanged at 15%) Positive Expectation was for an
increase in the Service
Tax by 200BPS in view of
GST implementation. No
increase in the Service Tax
Consumer Goods & is positive for consumer
Discretionary service companies such
as Wonderla Holidays,
Thomas Cook India,
Cox & Kings, Jubilant
Foodworks and Speciality
Restaurants.
Budget impact: Positive
Sector view: Positive (preferred picks: SBI, Bank of Baroda, PNB, Repco Home Finance and Gruh Finance
Banks Target for agricultural credit in FY2018 raised to Rs10 Neutral Mainly PSU Banks.
lakh crore (from Rs9 lakh crore in FY2017).
PSU Banks Rs10,000 crore for recapitalisation of banks provided in Neutral In line with already
FY2018. announced Indradhanush
Plan to recapitalise
PSU Banks. Promise
of additional funds
to be made available
(if required) is also
reiteration of earlier plan.
Banks Increased allowable provision for Non-Performing Assets Positive Will reduce tax liablity
from 7.5% to 8.5%. of banks; benefit to Axis
Bank, ICICI Bank, SBI, BOB,
PNB etc.
Banking & NBFC Affordable housing to be given infrastructure status. Positive Banks and HFCs like Repco
Home Finance, Gruh
Finance, LIC Housing,
PNB Housing etc. with
low average ticket size
loans; will have lower risk
weights; refinance from
NHB.
Banking & NBFC Bill to curtail the menace of illicit deposit schemes will Positive Will result in deposits (low
be introduced. cost) accretion for Banks
and NBFCs.
Budget impact: Positive
Sector view: Positive (prefered picks: L&T, Finolex Cables, V-Guard, Kalpataru Power and Skipper)
Electrification - With commitment to achieve 100% Positive L&T, Kalpataru Power
village electrification by May 2018, the government has & Transmission, KEC
increased allocation by Rs4,814 crore for the Deendayal International and Skipper.
Upadhayaya Gram Jyoti Yojna.
Water - To provide safe drinking water to over 28,000 Positive Va Tech Wabag, ITD
arsenic and fluoride affected habitations in the next Cementation and Ion
4 years through the National Rural Drinking Water Exchange.
Programme (NRDWP). Allocation for the National Ganga
Capital Goods / Power Plan "Namami Gange" stands at Rs2,250 crore.
Optic Fibre Cables- Allocation to the Bharatnet project Positive Sterlite Technology and
increased to Rs10,000 crore from Rs6,000 crore, which Finolex Cables.
will provide high-speed broadband connectivity to Gram
Panchayats with WiFi Hot Spots and access to digital
services at low tariffs.
Defence - Defence expenditure (excluding pension Positive L&T, BEML and Reliance
payout) has been provided a sum of Rs2,74,114 crore, Defence.
including Rs86,488 crore for defence capital.
Contd...
Sectoral analysis
Overall Key companies to be
Sector Key announcements
impact affected
Solar - Proposal for the second phase of Solar Park Positive Ujjas Energy and Indosolar.
development for an additional 20,000 MW capacity and
developing of 7,000 railway stations with solar power in
the medium term. Reduction of BCD for fuel cell based
Capital Goods / Power power generating systems from 6% to 5%.
LED - Basic customs duty & Countervailing duty on all Positive Crompton Greaves
parts for use in the manufacture of LED lights or fixtures, Consumer, Havells,
including LED lamps, reduced to 5% & 6%, respectively. Finolex Cables and Bajaj
Electricals.
Infra spending on railways - huge capital and development Positive ABB, KEC International,
expenditure for Railways at Rs131,000 crore, of which Kalpataru power &
Rs55,000 crore provided by the government. Transmission, Siemens,
BEML.
Railway Metro Rail Policy - A new Metro Rail Policy will be Positive ABB, KEC International,
announced, with focus on innovative models of Kalpataru Power &
implementation and financing. This will facilitate greater Transmission, Siemens and
private participation and investment in construction J Kumar Infra.
and operation with increased budgetary allocation to
Rs18,000 crore.
Source: India Budget, Sharekhan Research
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