Finance Minister P. Chidambaram unveiled new taxes on the rich and large companies on Thursday to fund higher-than-expected spending for the next fiscal year,in a budget that aimed to revive growth amid the country’s worst slowdown in a decade ahead of a 2014 election.
The following sectors/companies will benefit or be impacted by the budget proposals:
* Higher allocation for building roads should help highway developers,including IRB Infrastructure and Jaiprakash Associates. The budget also proposed a regulatory authority for the road sector and awarding of 3,000 kilometers of projects in Gujarat,Madhya Pradesh,Maharashtra,Rajasthan and Uttar Pradesh in the first six months of 2013/14.
* Encouragement for infrastructure debt funds,a source for long-term low-cost finance for large projects,will be positive for companies,including construction and engineering conglomerate Larsen & Toubro and GVK Power & Infrastructure Ltd.
* Textile companies such as Bombay Rayon and Arvind Ltd are seen benefitting from a “zero excise duty” proposal for the struggling readymade garment industry. * Broadcasting companies including Entertainment Network India,TV Today Network,Reliance Broadcast and HT Media are expected to gain from the proposal to expand private FM radio services to 294 more cities. LOSERS
* Increase in excise duty on sport utility vehicles (SUVs) to 30 percent from 27 percent is seen hitting demand for such vehicles made by companies that include Mahindra & Mahindra and Tata Motors.
* A proposal to raise the excise duty by about 18 percent on cigarettes is negative for India’s biggest tobacco company,ITC Ltd.
* Explorers such as ONGC Ltd,Oil India,Reliance Industries and Cairn India may face more investment risk,as cost sharing recovery mechanism will be withdrawn after planned move to a revenue-sharing policy from profit-sharing now,according to KPMG and Oil India.
However,lobby group Federation of Indian Chambers of Commerce and Industry,PricewaterhouseCoopers and Essar Oil said the change in policy would bring more transparency in the sector and do away with need for government approvals for capital expenditure which are beneficial to companies.
* Gross market borrowing is seen at 6.29 trillion rupees ($115.6 billion) in 2013/14,higher than market estimated,which is negative for banks including State Bank of India and Punjab National Bank as it is likely to trigger worries over liquidity in the system.
* Higher excise duty on mobile phones priced at more than 2,000 rupees,to 6 percent from 1 percent currently,will likely lead to costlier handsets and is a negative for handset makers,including Nokia and Samsung Electronics.
* Lack of measures to boost the housing sector and no clarity on a Real Estate Regulation Bill offset positive proposals like additional tax deduction on home loans of up to 2.5 million rupees and allocation of 20 billion rupees for an Urban Housing Fund.
This is seen as negative for property developers such as DLF,Unitech,Oberoi Realty and Sobha Developers.
($1 = 54.4 Indian rupees)