Post-budget analysis- BSE CG (Durables)

BSE CG 14,244.87 +2.25%

May 02, 15:46

Post-budget analysis - Indian Union Budget

What the Budget does

# Fourth UMPP at Tilaiya to be awarded shortly; Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamilnadu urged to bring five more UMPPs to the bidding stage by extending the required support.

# Rajiv Gandhi Grameen Vidyutikaran Yojana to be continued during the Eleventh Plan period with a capital subsidy of Rs 280 bn; allocation of Rs 55 bn for FY09.

# Rs 8 bn to be provided for Accelerated Power Development and Reforms Project (APDRP) in FY09.

# Proposal to set up a national fund for transmission and distribution (T&D) reform in the power sector.

# Exemption from 4% additional duty of customs has been withdrawn on power generation projects (other than mega power projects), transmission, sub transmission and distribution projects, and specified goods for high voltage transmission projects.

# Custom duty on project imports reduced from 7.5% to 5%

# Initiatives like skill development programme and setting up of industrial training institutes to be taken

# Defense allocation to be increased by 10%

# Excise duty being exempted on end-use basis, on refrigeration equipment (consisting of compressor, condenser units, evaporator, etc) above 2 TR (tonne refrigeration) utilising power of 50 KW and above.

# Parent company allowed to set-off the dividend received from its subsidiary company against dividend distributed by the parent company; provided that the dividend received has suffered DDT and the parent company is not a subsidiary of another company.

 

Impact on sector

# Aggressiveness in allotting UMPPs to prospective bidders expected to be helpful for engineering companies providing equipments and EPC services for power plants.

# Setting up of a national fund for T&D reforms to aid growth prospects of equipment suppliers and T&D project developers.

# Removal of exemption from additional customs duty on power generation, transmission and distribution projects to increase cost for companies importing such projects, which shall consequently be beneficial for domestic project developers. However, on the other hand, reduction in custom duty on project imports to nullify the impact.

# Initiatives like skill development programme and setting up of industrial training institutes to reduce talent crunch for engineering companies, which are reporting high levels of attrition

# Increase in defense allocation to aid prospect of companies providing defense equipments and technologies.

 

Impact on companies

# Allocation of UMPPs to support growth if equipment and service providers like BHEL, L&T and Siemens.

# Greater focus on the T&D front to be beneficial for ABB, Siemens, Crompton Greaves, Emco, Bharat Bijlee. Also, companies providing T&D project services like Jyoti Structures and Kalpataru Transmission to benefit.

# Removal of exemption from additional customs duty on power generation, transmission and distribution projects to benefit domestic companies like BHEL, L&T, Siemens and Reliance Energy.

# Skill development initiatives to pare pressure of attrition from companies like L&T and BHEL.

# Increase in defense allocation to aid prospects of Tata Power, L&T and Bharat Electronics.

 

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Post-budget analysis - FMCG

FMCG 2,474.45 +0.53%

Post-budget analysis - Indian Union Budget

What the Budget does

# Higher excise duty on non-filter cigarettes.

# Reduction in excise duty from 16% to nil on tea and coffee mixes.

# Reduction in excise duty from 16% to 8% on water purification devices, specified packaging material and breakfast cereals.

# Tea Fund to get Rs 40 crore special support fund, while Tea Research association would get Rs 20 crore.

# Customs duty on bactofuges reduced from 7.5% to nil

# Excise duty on paper, paper board and articles manufactured out of non-conventional raw materials reduced from 12% to 8% with a further reduction on clearances up to 3,500 MT from 8% to nil. Excise duty on certain varieties of writing, printing and packaging paper is to be reduced from 12 %to 8%.

# General CENVAT rate on all goods reduced from 16% to 14%.

# Central sales tax rate reduced from 3% to 2%.

Impact on sector

# Higher excise duty on non-filter cigarettes will bring it on par with both filter cigarettes. This is negative for the tobacco segment, which is already highly taxed.

# Reduction in excise duties on packaging products would provide thrust to the packaging segment. It would also help reduce wastage and spoilage.

# Reduction in excise duties on tea, coffee, water purification devices and breakfast cereals would lead to reduction in their cost and spur demand. Further, funds provided for re-plantation and rejuvenation of tea and coffee would improve the production.

# Customs duty reduction on bactofuges would benefit dairy industry and increase shelf life of milk.

Impact on companies

# ITC has leading brands in the non-filter segment like Scissors, Hero, Bristol, and Capstan. While higher excise duty would reduce its sales volumes in non-filter segment, no increase in excise on filtered cigarettes is positive. Further, reduction on excise on paper and paperboard would boost demand.

# Reduction in water purification devices would help Hindustan Unilever by way higher demand for its product 'Purefit' that it recently launched.

# Reduction in excise on tea, coffee and breakfast cereals would help companies like Tata Tea, HUL, Nestle, McLeod Rusell. Also the funds provided for plantation crops would benefit Tata Tea, Tata Coffee and Mcleod Rusell.

# Packaging materials is one area where most FMCG companies had expectations from the budget. The reduction in duties would drive growth in the processed foods and personal care segment. Essel Propack, Paper Products and FMCG companies in food segment like HUL, ITC, Nestle and Britannia would benefit.

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