Union Budget 2013‐14 (First cut


Credible and balanced budget

Edelweiss Research

February 2013

Union Budget FY14: Highlights
Fiscal math largely credible. Revenue slightly aggressive, but expenditure and subsidies well provided for. Consolidation process continues. Fiscal deficit for FY14 budgeted at ~4.8% of GDP (our estimate ~5.0% of GDP). Budgeted net borrowing is at ~INR 4.8tn. We believe it could be a bit higher by ~INR200bn. However, gross borrowing came higher than expected as government intends to rebalance the maturity profile of debt. Budget was growth supportive as it intended to support investments through extra tax exemptions for investment in plant and machinery. Further, it substantially raised the limits of tax‐free infra bonds. Some attempt has been made to boost financial savings by liberalising coverage of Rajiv Gandhi Equity Scheme (RGES) and insurance sector. Further, the finance minister announced that inflation indexed bonds will be introduced possibly with the intent to curb gold imports. While the finance minister cited CAD as a big worry, no export boosting measures were announced.

Positively impacted companies are:
y Capital goods companies namely Thermax, Cummins, ABB and Siemens y Refiners namely IOCL, BPCL, HPCL, MRPL and RIL y Housing finance companies namely LIC Housing Finance, Gruh Finance and Dewan Housing y Bus manufacturers namely Ashok Leyland, Tata Motors and Eicher Motors y Affordable housing developers namely Jaypee Infratech & Puravakankara Projects

Fiscal math looks largely credible
Fiscal math largely credible
y Fiscal consolidation process continues, although at a bit slower pace compared to FY14. The FM has announced gross fiscal deficit for FY14 at 4.8% of GDP (against 5.2% of GDP in FY13). y Broadly speaking the Budgeted fiscal target is certainly in the realm of possibility, we think that fiscal deficit of 5% of GDP is more realistic.

Revenue slightly aggressive
y Gross tax revenue collection of the government will improve on account of better tax buoyancy on account of improving economy and some changes in the taxes, which will add to government kitty. However, the benefits of headline tax rate hikes in indirect taxes last year will be absent in FY14. Overall, we think that 18% YoY growth in tax revenues is more realistic compared to 19% YoY assumed by the government (against ~17% YoY achieved in FY13). y On non‐tax revenues side as well, we think FM has been a bit aggressive, particularly with regards to telecom revenues .

Expenditure does not seem to be under‐budgeted
y Budgeted growth of 16% YoY in expenditure is sizeable and we do not see any material risk of slippage on this front. Subsidies (at ~2% of GDP) have been adequately provided especially given that government is undertaking periodic diesel price hikes. y Meanwhile, sharp cuts in plan expenditure undertaken in FY13 are being compensated by budgeting 29% YoY growth in FY14 S of this f hi i l to dsubstantial b i li i development ld l di FY14. Some is related increase in rural spending.


Minor changes in taxes
Slight changes in direct and indirect taxes
y Minor changes in the direct taxes. Surcharge raised to 10% from 5% on corporate taxes. y Surcharge introduced on super rich (income above INR 10mn) y No changes in headline indirect taxes rates. y Voluntary compliance encouragement scheme introduced in service taxes for the defaulters. y DTC bill to be introduced in this budget session itself. y GST no specific time‐frame for implementation mentioned. However, FM mentioned that significant progress has been made and he hoped to introduce constitutional amendment and draft bill in GST in coming months.


Few positive announcements…
Positive for investment
y Investment allowance of 15 % in FY14 and FY15 to manufacturing companies which invest more than INR1bn in plant and machinery. from INR250bn T free f infra i f bonds b d to t increase i f INR250b to t INR500bn. INR500b y Tax y Road regulator to iron out issues in the sector.

Incentives to boost financial savings
y RGES scheme to incentivise households savings in equities and mutual funds broadened in coverage. y Announcement to introduce inflation indexed bond. Certain steps to increase the coverage of y insurance.

y Additional tax deduction for first time house buyer (loan up to INR 2.5 million)


Fiscal deficit likely to be ~5% of GDP in FY14
Fiscal Deficit FY14 at 5.0% of GDP Particulars Ta x revenue (net) ‐ Di rect ta x ‐ Indi rect ta x Les s : As s i gnment to s tates Non‐ta x revenue recei pts of which telecom & 3G Capi tal recei pts of which disinvestment TOTAL RECEIPTS Non‐pl an expendi ture a) Total subsidy ‐ Food subsidy ‐ Fertilizer subsidy ‐ Oil Subsidy ‐ Interest and others subsidy b) Interes t payments c) Other revenue expendi ture d) Ca pi ta l expendi ture Pl a n expendi ture ‐ Revenue ‐ Capital TOTAL EXPENDITURE Fiscal deficit Revenue defcit Revenue defi ci t/GDP (i n %) Fi s ca l defi ci t/GDP (i n %)
RE: Revised Estimates BE: Budget Estimates Source: Budget documents, Edelweiss research

FY14 (Edel) 8,741 6,654 5,565 3,478 1,624 300 605 400 10,970 11,078 2,360 950 660 650 100 3,707 3,911 3 911 1,100 5,553 4,433 1,121 16,631 16 631 5,662 4,046 3.6 5.0 50

FY14 (BE) 8,841 6,709 5,650 3,518 1,723 408 665 400 11,228 11,100 2,311 900 660 650 101 3,707 3,911 1,171 5,553 4,433 1,121 16,653 5,425 3,798 3.3 4.8

FY13 (RE) 7,421 5,685 4,695 2,959 1,297 194 381 240 9,099 10,016 2,577 850 660 969 98 3,167 3,454 3 454 819 4,292 3,434 858 14,308 14 308 5,209 3,912 3.9 5.2 52

FY13 (BE) 7,711 5,676 5,054 3,019 1,646 580 417 300 9,774 9,699 1,900 750 610 436 104 3,198 3,557 1,043 5,210 4,205 1,005 14,909 5,135 3,503 3.4 5.1

(INR bn) FY12 (Actual) 6,297 4,967 3,924 2,595 1,217 174 369 181 7,883 8,920 2,179 728 700 685 66 2,732 3,210 3 210 799 4,266 3,337 786 13,186 13 186 5,303 3,944 4.4 5.9 59

Borrowing could exceed by ~INR 200bn
Funding the Fisc Gros s ma rket borrowi ng ‐ Net ma rket borrowi ng
Net short term (T‐bi l l ) Sma l l sa vi ngs scheme Others

FY14 (Edel) 6,527 5,077
198 58 329

FY14 (BE) 6,290 4,840 198 58 329 5,425

FY13 (RE) 5,580 4,674 457 86 (8) 5 209 5,209

Fi s ca l defi ci t
RE: Revised Estimates BE: Budget Estimates Source: Budget documents, Edelweiss research

5 662 5,662

Net budgeted market borrowing of INR 4.8tn (vs INR 4.67 in FY13) was inline with the market expectation However, gross borrowing came much higher than the expectations of ~INR 5.75tn The higher buyback/switching be carried Th main i reason for f hi h gross borrowing b i is i b b k/ it hi (extra ( t ~INR500bn) ~INR500b ) which hi h will ill b i d this year for better debt management.


Comparison to pre‐crisis period
Revenues still long way to go
15.6 14.2 12.8

Expenditure reined back close to pre‐crisis levels

10.5 9.0

(as % of GDP)



(as % of GDP)

6.0 FY14(Edel) FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

FY14(Edel) FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

Gross tax as % of G f GDP
Source: CMIE, Edelweiss research

Total expenditure as % of GDP



FY13 : Significant consolidation in 2H
In 2H FY13 government undertook aggressive fiscal consolidation to achieve gross fiscal deficit of ~5.2% of GDP in FY13 (vs Budgeted ~5.1% of GDP). The consolidation was undertaken mainly via reductions in expenditure (especially plan expenditure).
(Fiscal deficit as % of Budgeted fiscal deficit)

Deficit as % of budgeted fiscal deficit

106 82 58


Sept. May Jun. Aug. Dec. Oct. Jul. Mar. Apr. Nov.



Source: CMIE, Edelweiss research


Sector-wise Announcements


Sector Auto Industry/market wishlist Reli ef in exci s e duty. Edelweiss expectations Not l i kel y. Announcements in Budget I ncrea s e in exci s e duty to 30% on non‐ ta xi SUVs in 27% bra cket. No a nnouncement. No a nnouncement. Impact on sector/company Ma rgi na l nega ti ve for M&M as we expect the addi ti onal l evi es to be pa s s ed on to the cus tomer. Pos i ti ve for M&M. Ma rgi na l nega ti ve for M&M.

Cl a ri ty on di es el pa s s enger vehi cl e ta xa ti on. wa s expected
Benefi ts in ta x and R&D expendi ture to el ectri c vehi cl es .

Di es el ta x on hi gher ca pa ci ty SUVs Li kel y.

To provi de INR149bn for JNNURM (to Pos i ti ve for As hok Leyl a nd, Ta ta purcha s e upto 10k buses, es peci a lly Motors , Ei cher Motors . by hi l l sta testes ). ) by hi l l sta
To increa s e ta x ra te on pa yments of roya l ty/techni ca l fees to non‐ res i dents from 10% to 25%. Neutra l for Ma ruti as appl i cabl e ra te wi l l be the ra te of ta x stipul a ted in the DTAA (10% between Indi a and Ja pa n).

Cus tom duty hi ke from 75% to 100% on luxury ca rs (CI F va l ue above
Cus tom duty hi ked from 60% to 75% on bi kes above 800cc engi ne ca pa ci ty.

Neutra l . USD40k). Neutra l . Neuta l .

Exci s e duty on truck cha s s i s reduced from 14% to 13%.


Sector BFSI Industry/market wishlist Ba nk's l ending to power sector Edelweiss expectations • Sectora l expos ure li mi t for ba nks in ca s e of lending to power sector ca n be rel a xed to fa ci l i ta te fres h l ending. • Long term ba s e ra te to be introduced for i nfra s tructure proj ects whi ch shoul d be delinked from ba nk ba s e ra tes in order to provi de sta bl e interes t cha rges for proj ects • Increa s i ng the TDS li mi t on fi xed
d i t t R 25 000 f 10 000 t

Announcements in Budget

Impact on sector/company

Ta x sops on fi xed depos i ts depos it to Rs 25,000 from 10,000 a t pres ent. some rel i ef to ALM: Cons idering low depos i t mobi liza tion and l ending s kewed towa rds longer tenor as s ets Commodi ti es Tra ns a cti on Ta x

• Ta x brea k on longer tenor to provi de

Levy of CTT on commodi ty tra di ng

Propos a l to introduce Commodi ti es Tra ns a cti on ta x (CTT) in a li mi ted wa y. 0.01% of the va l ue of the contra ct i mpl emented

Nega ti ve for MCX as it i mpa cts the j obbi ng vol umes and increa s es cos t of tra di ng on MCX vi s ‐à ‐vi s interna ti ona l excha nges . However, on the pos i ti ve si de th the i ntroducti of bi l wi l now al so s pecifi eson tha t CTT, the

commodi ti es tra di ng wi l l not be cons i dered a specul a ti ve tra ns a cti on and hence CTT pa i d by the a s s ess ee al ong wi th los s s income es incurred, if any n now bus i nes thereby leaca ding to ta x be adj us ted agai ns t other benefi ts .


Sector Industry/market wishlist BFSI crop loa ns to be conti nued and to be extended to Pri va te SCBs as wel l . by ba nks to fa rmers at 9% and if the repa yment is done wi thi n the agreed ti me fra me, the fa rmer ends up pa yi ng onl y 4% RoI whi l e the ba nk ca n cl a i m another 5% from the government vi a RBI . Whi l e now pri va te ba nks too ca n offer thi s scheme we bel i eve they are under no compul s i on to do so.
Pos i ti ve for home loa n fi na nci ers in the ca tegory of INR2.5mn and bel ow, na mel y LI CHF, Dewa n Hous i ng, Gruh Fi na nce. SBI too sta nds to benefi t to a li mi ted extent on the home loa ns portfol i o. i ti ve for MCS‐SX, however the li mi t FIIs to be permi tted to tra de currency Pos deri va ti ves on excha nge to the extent to the extent of thei r expos ure onl y of thei r Indi a n rupee expos ure in li mi ts the overa l l vol ume expa ns i on I ndi a I nfra s tructure ta x‐free bonds of INR500bn ca n be iss ued in FY14 Though the el i gi bl e li mit of INR500bn is lower tha n the INR600bn of la s t fi s ca l , gi ven tha t onl y I NR250bn is li kel y to be mobi zed under thi s on hea of the tota l llii mi t the reducti ind Addi ti ona l deducti on of interes t upto INR0.1mn for fi rs t home loa n (of les s that in h INR2.5mn) INR2 5 )sancti oned i d i FY14. FY14 Va l ue of property to be l es s tha n INR 4 mn

Edelweiss expectations

Announcements in Budget Interes t s ubventi on scheme for ST ca n offer the lucra ti ve scheme to fa rmers . A bri ef des cri pti on of the

Impact on sector/company Pos i ti ve for pri va te ba nks as they too

scheme‐Under thi s loa ns are provi ded

overa l l li mi t is unlikel y to ha ve any impa ct


Capital Goods
Sector Ca pi ta l Goods Industry/market wishlist Increa s ed al l oca ti on to s trenghtheni ng T&D network to cut AT&C los s es Edelweiss expectations Increa s ed a lloca ti on to s trenghtheni ng T&D network to cut AT&C los s es Announcements in Budget No a nnoucement Impact on sector/company Nega ti ve

Inves tment Al l owa nce @15% on inves tments in new Pl a nt & Ma chi nery worth INR 1bn and above
Ta x on roya l ty pa yments by Indi a n s ubs idia ry hi ked to 25% from 10% Increa s ed al l oca ti on of Ca pi ta l

Pos i ti ve for Ca pi ta l equi pment compa ni es li ke Therma x, Cummi ns , ABB, Si emens , etc.
Ma rgina l ly nega ti ve for Cummi ns Indi a

Expendi ture in defence (I NR 867bn , 25% YoY growth) in FY14E

Pos i ti ve Bharat El ectrnoi cs a nd La rs en & Toubro


Sector Cement Industry/market wishlist Reducti on in exci s e duty on cement and s i mplifica tion of the duty structure to s pecific ra te per MT agai ns t the current compl ex structure of cha rgi ng it on ad‐va l orem cum speci fic duty ba s i s and further rel a ti ng it to the Abol i ti on of import duty on pet coke and levy of cus toms duty on cement i mports .
Cl a s s i fy cement as 'Decl a red Goods ' under Secti on 14 of the Centra l Sa l es ta x Act to put it on equa l footi ng wi th other core sector goods like coa l and steel .

Edelweiss expectations No cha nge.

Announcements in Budget No cha nge.

Impact on sector/company

No cha nge.

No cha nge.

No cha nge.

No cha nge.

Cus toms duty on stea m coa l hi ked by 2% and CVD by 1%.
Ta x on roya l ty pa yments hi ked to 25% from 10%.

The i mpa ct will be ma rgi na l in the INR0.3‐0.8 ra nge per ba g of cement. No i ncrementa l i mpa ct on ACC and Ambuj a Cement as Indi a ha s DTAA wi th Swi tzerl a nd ca ppi ng the ta x at 10%.


Consumer Goods
Sector Industry/market wishlist Cons umer Rura l ini tia ti ves on income genera ti on. Goods Edelweiss expectations We expected thi s to conti nue, though growth coul d modera te. Announcements in Budget Contri buti on to MNREGA scheme ma inta ined at I NR330bn (no increa s e), in li ne wi th expecta ti ons . Impact on sector/company Rura l growth ha s been growi ng ahead of urba n growth whi ch is li kely to conti nue.

No increa s e in exci s e duty on ci ga rettes . I ncrea s e in exerci s e duty by 8‐ Exci s e on ci ga rettes increa sed 18% on The hi ke is s entimenta lly nega ti ve for 10% for ci ga rettes wa s expected. al l segments except bel ow 65mm. al l ci ga rette compa ni es , es peci ally the sma l ler pl a yers as thi s is second yea r of ha rs h Budget for ci ga rettes . ITC will need to hi ke pri ce ~13% to offs et thi s exci s e ri s e to ma inta in EBI T ma rgi n at the current 32.3%; ITC's strong pricing power wi l l ha ve l i ttl e impact on vol umes , though no cha nge in sub 65mm ca tegory wi l l prop vol umes .
exci s e ri s e to ma inta in EBI T ma rgi n at

An upwa rd revi s i on in the income ta x exempti on li mi t.

We expected an increa se as it woul d be a step towa rds di rect tax code.

Ta x credi t of INR2,000 for income up to I NR500,000 (l ea di ng to effecti ve exempti on of I NR220,000 for i ndi vi dua l s wi th income l es s tha n I NR500,000).

We expect thi s step to ma rgina l l y increa s e di s pos abl e income of the urba n poor/urba n mi ddl e cl a s s whi ch will hel p boos t Cons umer s pendi ng to some extent.

Ra te of tax increa s ed from 10% to 25% on royal ti es and techni ca l fees pa id to non‐res i dent. Thi s wi l l be effecti ve as per government note from Apri l 1, 2014 (i .e. FY15).

No s i gnifica nt impa ct on mos t compa ni es (HUL,i Col ga te) (HUL Cdue l to DTAA )d ra te over ‐ri di ng the enha nced rate. Si nce it is a ppl i ca bl e from FY15 there is no nea r term impa ct.



Sector Industry/market wishlist Cons tructi on Steps to lower borrowi ng cos ts by a llowi ng refi na nci ng of INR term loa ns through ECBs . Edelweiss expectations Unlikel y. Announcements in Budget No a nnouncement. Government will cons ti tute a regul a tory authori ty for the roa d sector.
3,000 km of roa d proj ects will be awarded in the fi rs t si x months of 2013‐14.

Impact on sector/company Neutra l . Pos i ti ve as it will increa s e a ccounta bil ity and tra ns pa rency in the system.
Pos i ti ve for the sector as it will increa se order fl ow.


Sector IT Industry/market wishlist MAT on SEZ income to be wi thdra wn as it is counter to the long‐term pol i cy a nnounced by the Government through the SEZ Act. Al terna ti vel y, MAT shoul d be wi thdra wn at l ea s t in res pect of SEZs whi ch ha ve al rea dy been noti fi ed so tha t economi c vi a bil ity of thes e SEZs is protected Edelweiss expectations Di d not expect to occur Announcements in Budget No a nnouncement Impact on sector/company

Deni a l of ta x deducti ons for ons i te s ervices .With the suns et of STP benefi ts , there ha s been deni a l of ta x deducti ons for ons i te s ervi ces on one pretext or the other, whi ch the exporters of IT s ervi ces are enti tl ed to.

The expecta ti on wa s tha t ons i te s ervi ces will be trea ted as exports of s ervi ces and not as export of ma npower

No a nnouncement

Increa s e in s urcha rge to res ul t in 1.3% average ta x increa s e as some porti on of the income is on MAT and ma jj oii NonMAT MAT. i i tty onN

Ma rgina l ly nega ti ve i mpa ct


Sector Medi a Industry/market wishlist Subs umpti on of servi ce ta x and enterta i nment ta x in GST. Reducti on of cus toms duty on di gita l hea d ends and s et top boxes . coura ge domes ti c producti on of Edelweiss expectations Unlikel y as it al s o depends on the i mpl ementa ti on of GST whi ch ha s been pendi ng for a few yea rs . Unlikel y as it will put a ddi ti ona l burden on the government and domes ti c producti on of set top boxes . We expect al l compa ni es to pa s s thi s Announcements in Budget No announcement Impact on sector/company No impa ct

Cus toms duty on s et top boxes Thi s will be a negati ve (~I NR65 impact) increa s ed from 5% to 10% to promote for cabl e and DTH compa ni es as di s al mos t al l set top boxes are imported. STBs . hi ke to cons umers .
FM Pha s e 3 aucti ons wi l l be conducted i n FY14. 294 ci ti es (popul a ti on > 0.1mn) will ha ve 839 FM sta tions . Pos i ti ve for ENI L, Next Medi aworks and RBNL. Al so, s li ghtl y pos compa iti RBNL Al iti velifor htl ni es like Sun TV, DB Corp and HT Medi a whi ch have sma l l FM ra di o operati ons as a % of tota l sal es. f

Temporary tra ns fer or permi tti ng the Li kel y nega ti ve for broa dca s ters as us e or enj oyment of a copyri ght movi e a cqui s i ti on cos ts mi ght increa s e rel a ti ng to ci nema togra phi c fil ms was due to hi gher s ervice ta x. Li kel y mi nor ful l y exempt from servi ce ta x; now, nega ti ve for DTH/ca bl e opera tors who thi s exempti on wi l l be res tri cted to provi de pa y‐per vi ew fa cili ty. exhi bi ti on of ci nema togra ph fi l ms in movi e thea tres .


Metals & Mining
Sector Meta l s and Mi ni ng Industry/market wishlist Steel ‐ increa s e in i mport duty to 10% from 7.5% Edelweiss expectations Low proba bi li ty Announcements in Budget No cha nge Impact on sector/company None

Remova l of steel imports from free tra de a greements (FTA)
I mpl ementa ti on of zero import duty on import of certa i n gra des of coa l

Unl i kel y. Mea s ure al s o requi res concurrence of forei gn countri es Li kel y

No cha nge
I mport duty on al l therma l coa l gra des at 2%

None Senti menta ll y pos i ti ve for Coa l I ndi a

Impos i ti on of 4% exci s e duty on si lver produced from zi nc/l ea d ore
Increa s e in cus toms duty for a l uminium from 5% to 10%

Nega ti ve for HZL and Sterl i te
None None

Unl i kel y Unl i kel y

No cha nge No cha nge

Iron ore ‐ reducti on in export duty (currentl y 30%)


Oil & Gas
Sector Industry/market wishlist Oi l & Ga s Remova l of Na ti onal Ca l a mi ty Conti ngent Duty on
Crude Oi l l evi ed @ Rs .50/MT.

Edelweiss expectations
We di d not expect any cha nges on the sa me.

Announcements in Budget No a nnouncement No a nnouncement No a nnouncement

Impact on sector/company

Extens i on of 100% Exci s e Duty Concession to North Ea s t Refi neri es . Decl a red Goods sta tus to Na tura l Ga s and LNG
Extens i on of 'Infra s tructure Sta tus ' to 'Ga s proj ects ' hol i da y under Secti on 80‐IA Extens i on of 7 yea r ta x hol i da y on refi neri es from March 2012 to Ma rch 2017 100% Depreci a ti on on Fuel qua l i ty up‐gradati on proj ects I ncl ude petrol eum products in GST, whi l e addres s i ng the concern of sta tes through levy of an a ddi ti ona l ta x None

Shoul d happen, ma ybe pa rti a l say 50% or 75% No cha nges
No cha nges

No a nnouncement such as LNG termi na l s for the purpos e of 10‐yea r ta x

No cha nges
No cha nges

No a nnouncement
No a nnouncement No cha nges

No cha nges

No a nnouncement

I mport duti es on crude to increa s e 2.5%. Al s o increa s es products by 2.5% ma inta ined

No a nnouncement

No cha nges . Thi s is pos i ti ve for refi ni ng from 0% to compa ni es (IOCL, BPCL, HPCL, MRPL, RI L) duti es on al l MRPL RI L) compa ni import es (IOCL BPCL HPCL as the current duty di fferenti a l of ~2% is except di es el , LPG, Keros ene Revenue sha ring model wi l l ea s e the ca pex approval proces s . If the Ra ngaraj an Pa nel recommenda ti ons on na tura l ga s pri ci ng are a pproved, it wi l l be a pos i ti ve for RI L and ONGC. Any a pprova l s by CCI for NELP bl ocks wi l l lea d to expl ora ti on acti vi ti es pi cki ng up

‐ PSC for NELP bl ocks wi l l in future be moved from profi t petrol eum sha ri ng to revenue shari ng model Sha l e ga s pol pol ii cy cy to tobe beaannounced nnounced ‐ Sha s oon ‐ Natura l ga s pricing pol i cy wi l l be revi ewed s oon ‐ Ca bi net Commi ttee on Inves tment (CCI) wi l l meet to cl ear hurdl es in expl ora ti on/devel opment of NELP bl ocks





t f NELP

Inves tment al l owa nce of 15% on new a nt & ma chi nery a cqui red and led in FY14 and FY15, and worth 1bn and above

The sa me is pos i ti ve for sector but more pl for RI L. RI L ha s pl a nned $12bn ca pex insta l and mos t of the same is expected to be INR commerci a l 2015 end.


Sector Pha rma Industry/market wishlist Rolli ng out of uni vers a l a cces s progra mme to es s enti a l medi ci nes wi th an outl a y of INR5,000‐ 6,000 crores p.a . (0.1% of GDP). Edelweiss expectations Importa nt to see if pri va te s ector pl a yers wi l l be part of the procurement for a cces s to es s enti a l medi ci nes . Announcements in Budget Hea l thca re expendi ture increa s ed from INR30,000 crores to INR37,330crores (i ncrea s e of 24%); overa l l , the expendi ture under Nati ona l th lMi ss i on s ed to N i l Hea lH h Mi i i ncrea i d INR21,200 crores and will i ncl ude both rura l and propos ed urba n mi s s i on. No a nnouncement.
Increa s e in s urcha rge from 5% to 10%; inves tment a llowa nce of 15% over current depreci a ti on on ca pex of INR100 crores and more on P&M.

Impact on sector/company Pos i ti ve as it increa s es the rea ch for medi ci nes thereby improving penetra ti on l evels in both urba n and rura l area s .

Increa s e wei ghted deducti on on R&D to 300% from current 200%. Revi s i t the MAT currentl y bei ng l evi ed on SEZs , gi ven indus try ha s hi gh inves tment in SEZs .

a) Nega ti ve impa ct of 0.4% increa s e in MAT ra te to an extent tha t domes ti c a ccounts for 40% of tota l bus i nes s . b) Inves tment a llowa nce does not benefi as mos t compa nita esxpa benefi t as mos t compa ni es pa y at y ta x at MAT.

Remove exci s e duty di s pa ri ty between API and formul a ti ons . Hea l thca re Increa s e in exempti on limi t under Secti on 80D (hos pi ta l s for hea l th ins ura nce. )

We expected thi s in order to reduce di s pa ri ty in the MODVAT structure. Li kel y.

No cha nge in the duty structure.
More ins ura nce penetra ti on in Ti er ‐II ci ti es wi thout pri or approval of IRDA and hea l th cover under soci a l securi ty packa ge for unorga ni zed sector. Improve a fforda bi lity for qua l i ty hea l thca re in thes e towns tha t are ta rget area s for growth by speci a l ty hos pi ta l s .

Pri ori ty s ector sta tus to hea l thca re incl uding hos pi ta l s and di a gnos ti cs . Increa s e in s urcha rge from 5% to 10%. Nega ti ve i mpa ct wi th increa s e in ta x ra te by 1% as mos t profi t comes from domes ti c busi ness.


Real Estate
Sector Rea l Es ta te Industry/market wishlist Gi ve i nfra s tructure sta tus to a fforda bl e hous i ng s egment. Ta x exempti ons for sma l l hous es (under‐60 sq.m ca rpet area ) and speci a l hous i ng zones .
Increa s e in exempti on li mi t on interes t pa yments on morta ges .

Edelweiss expectations Li kel y Li kel y Not likel y

Announcements in Budget Current sops for affordabl e hous i ng to conti nue. No a nnouncement.
Addi tiona l interest deducti on of I NR100,000 for hous i ng loa ns up to INR2.5mn ta ken for fi rs t home from the peri od 1.4.13 to 31.3.14.

Impact on sector/company No Impa ct No Impa ct
Pos i ti ve for Ja ypee Infra tech (BUY) and Pura va ka nka ra Proj ects (Unra ted). Other li s ted compa ni es do not ha ve a si gni fi ca nt pres ence in <I NR3mn segment No Impa ct.

Indus try sta tus to rea l es ta te.
I mpl ementa ti on of REI Ts so tha t sma l l inves tors wi l l get a cha nce to inves t in rea l es ta te as s ets . Surcha rge on ta xes for hi gher income groups . ta xa bl e income exceeds INR10mn per r.

Not likel y Not likel y Li kel y pri ce sens i ti ve / does not fa ce yea affordabi l i ty is s ues .

No a nnouncement. No a nnouncement. Surcha rge of 10% for pers ons whos e

No Impa ct. Mi ni ma l i mpa ct as s egment is not

Urban U b hous h i ing fund f dto be b set up byb NHB for I NR20bn. TDS to be deducted at a ra te of 1% for tra ns fer of immova bl e property (other agri cul ture la nd), where the cons i dera ti on exceeds INR5mn.
Hous es above 2,000 sq ft or above I NR1crore to ha ve lower abatement of 70% agai ns t 75%.

Unlikel y to i mpa ct li sted spa ce.
Coul d impa ct dema nd for rea l es ta te properti es in NCR and pa rtia lly in tha n Mumba i wi th a pos s ible fa l l in s pecul a ti ve tra ns a cti ons .
To i mpa ct cos ts by ~0.6%. Expected to be pa s s ed on to end us ers . Senti menta lly nega ti ve for DLF, Oberoi .


Power & Infrastructure
Sector Power Industry/market wishlist Edelweiss expectations Announcements in Budget 2% cus toms duty i mpos ed on therma l coa l imports (ea rl i er nil) & CVD increa s ed to 2% from ea rli er 1%. Impact on sector/company PPAs ha ve a cl a us e to pa s s on such increa s e in cos t to procurers . However, thi s is nega ti ve for devel opers ha vi ng mercha nt contra cts . Nega ti ve for JSW Energy and PTC Indi a . Pos i ti ve ‐ on expected lines

Sec 80 IA benefi ts extended and DDT exempted for di vi dend from forei gn compa ni es by another yea r


Sector Reta il Industry/market wishlist Cl a rity on nua nces of norms (s ourci ng, ba ck end inves tment, etc.) for FDI in mul ti bra nd reta i l . No further regul a ti ons to curb gol d dema nd; in Ja nua ry 2013, government ha d hi ked i mport duty on gol d from 4% to 6%. j ewel l ers (from current 180 da ys credi t to 90 da ys ), ma nda tory quoti ng of PAN numbers for hi gh va l ue purcha s es and to i ntroduce gol d‐ li nked fi na nci a l ins truments to di vert sa vi ngs from phys i ca l gol d to bonds .
An upwa rd revi s i on in the income ta x exempti on li mi t.

Edelweiss expectations Mi rrori ng proa cti venes s in promoti on of FDI in si ngl e‐bra nd reta i l , we expected government to provi de cl a ri ty on norms on FDI in mul ti ‐ We ha d not rul ed out stri cter regul a ti ons li ke reducti on of credi t peri od by domes ti c ba nks provi ded to

Announcements in Budget No a nnouncement.

Impact on sector/company Confus i on pers i s ts rega rdi ng FDI norms ; wi l l conti nue to awa i t cl a ri ty. Pos i ti ve for bra nded jewel l ers who

No cha nges a nnounced. were fea ri ng stri cter rul es

of PAN numbers for hi gh va l ue

We ha d expected an increa s e as it coul d be a step towa towa rds di di rect ta x code.

Ta x credi t of INR2,000 for income up to INR500,000 (l ea di ng to effecti ve exempti on of I NR220,000 for

To further reduce centra l exci s e duty on nded cl othes (effecti ve exci s e duty reduced by 90bps from 4.5% on 3.6% on appa rel reta i l pri ce in the la s t budget).

We ha d belived thi s wa s unlikel y due to ba l l ooni ng fi s ca l defi ci t and the fa ct tha t there wa s cut initi a ted in the la s t budget.

Zero exci s e duty route', as exi s ted pri or to Budget 2011‐12, is bei ng res tored in res pect of bra nded rea dyma de garments and ma de ups. GST roa dma p la i d down Servi ce ta x will be levi a ble on ta xa bl e s ervi ce provi ded in res ta ura nts wi th oni ng or centra l ai r hea ti ng in any pa rt of the es ta bl i s hment at any ti me duri ng the yea r.

We expect thi s reforms to ma rgina lly e di disspos posaa bl income ofthe the increa s e bl ee income of urba n poor/urba n mi ddl e cl a s s whi ch s is cl ea rl y pos i ti ve for bra nded bra Thi

ga rment pl a yers and al s o reta i l ers li ke Pa nta l oons and Shoppers Stop
Thi s is a cl ea r pos i ti ve for Reta i l pl a yers .

Thi s will be nega ti ve for QSRs and fi ne‐ di ni ng wi th ai r‐condi tioni ng ai r‐condi ti


Sector Tel ecom Industry/market wishlist Edelweiss expectations Announcements in Budget Increa s e in s urcha rge to res ul t in 1.6% average ta x increa s e. Impact on sector/company Ma rgina l ly nega ti ve i mpa ct


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