BUDGET

2015-16

In the right
direction
1
28 Feb 2015

28 FEB 2015

Investment summary

Strategy Report

UNION BUDGET FY16

Fiscal credibility maintained in medium term (FRBM relaxation by a year) despite large award to states. Interest rate trajectory
intact (another ~75 bps rate cuts in FY16): Hence Banking, Auto, Realty to benefit. Rule-based monetary policy framework
okayed, which also ties government down to fiscal consolidation. Slippage to 3.9% used for infra vs. subsidies

Ease of doing business: Tax procedures, GAAR postponed, Corporate tax rate cut 30% to 25% over 4 years from FY17
(but certain exemptions to be removed and surcharge increased from 10% to 12% from FY16 for most large companies)

Financial savings: Pension scheme, gold bonds, penal measures for undisclosed monies

Infrastructure:
Overall allocation for transport up 1.7x at Rs 1,934 bn

PPP to be revisited with higher sovereign risk

Fund (NIIF) planned with Rs 200 bn corpus and 10x leveragability

Tax free bonds

Plug & play approach to be extended from Power to other sectors

Investment trusts to monetize operating assets

Biggest beneficiary - Roads: ~Doubled allocation Rs 850 bn, though some of it necessitated by reduced BoT/ PPP models
PSU and Rail capex also substantially increased, 5 UMPPs planned, Corporatization of public ports with land monetization

Financials: SARFESI Act extension to NBFCs. Fungibility of foreign limits for banks who have near-breached FII limits (Axis Yes!

Other beneficiaries: Clarity on REITs, Reforms in Commodity exchanges by SEBI, Customs duty increase on CVs (to pre-empt
Chinese dumping), Pharma companies building capacities in AP/ Telangana

Losers: Cigarette excise increased despite fall in volumes, Path for PSU bank capitalization not specified

Top Picks > $2 bn mkt cap: HDFC Bank, L&T, Eicher Motors, Rural Electrification, IDFC, LIC Hsg, ABNuvo, Ashok Leyland

Top Picks < $2 bn mkt cap: Prestige Estates, Oberoi Realty, Arvind, Tube Invst, Cox & Kings, Redington, Ahluwalia Contracts
2

28 FEB 2015

Top post budget picks

Strategy Report

UNION BUDGET FY16

CMP
(Rs)

Target Price
(Rs)

HDFC Bank

1,068

1,364

Operating leverage to kick in; RoAs to be over 2% by FY17

L&T

1,767

1,803

Biggest beneficiary of 1.7x increase in transportation capex

16,227

20,036

Rural Electrification

331

430

High RoE amongst PSU entities with visibility on ~20% CAGR growth, benefit from infra reforms

IDFC

173

213

Conversion to Bank is structurally positive; FII room, high capitalisation

LIC Housing

479

550

20% CAGR growth, no asset quality challenges, possibility of margin improvement

1,719

2,587

70

92

Prestige Estates

286

323

Sales run-rate to double in 3-4 years; value unlocking potential through REITs

Oberoi Realty

322

348

Volume revival through new launches; value unlocking potential through REITs

Arvind

307

410

Play on scale up of Brands & Retail business

Tube Invst

352

487

Value unlocking of general insurance business; operating leverage in standalone business

Cox & Kings

320

428

Key beneficiary of uptick in domestic tourism; de-leveraging to drive growth

Redington

123

196

Play on Digital India and GST implementation. ~16% CAGR in earnings and 23% RoE

Ahluwalia Contracts

238

305

30% ROCE at 12x FY17 PE, key beneficiary of realty build up

Company

Eicher Motors

Aditya Birla Nuvo

Ashok Leyland

Rationale

Structural growth in 2W business, cyclical recovery in CVs

Value unlocking triggers - Insurance, Fashion & Lifestyle. 25% CAGR in NBFC business
FCF cycle at a sweet spot

28 FEB 2015

Sectoral impact: Summary

Sector

Autos

Banking &
Financial
Services

Cement

UNION BUDGET FY16

Key budget measures

Strategy Report

Excise duty was increased pre-budget itself. Few indirect positives:

Increased allocation (>2x) towards road construction
Custom duty on imported CVs (CBUs) increased to 40% from 10%
Higher MNREGA allocation and long-term measures to improve
farmer productivity/income
Capex for defense increased by 15% YoY (MHCVs by 10% YoY)
Measures to enhance individual tax exemptions

Fungibility of FDI and FII limits

SARFAESI Act benefit extended to NBFCs

Agriculture loans target at Rs 8.5 trn vs. Rs 8 trn in FY15

Limited capital allocation of PSU banks

Establishing Bank Board Bureau for PSU banks. Path towards

creation of Holding Company structure

Increased spending on infrastructure/housing and plans to revitalize

PPP mode of infrastructure

Impact

Positive: Ashok Leyland,

Bharat Forge, 2Ws, tractors

Positive for Private banks

and NBFCs

Positive: Industry would

benefit from higher volume
growth

Strategy Report

28 FEB 2015

Sectoral impact: Summary

Sector

Capital goods

Commodity
Exchanges

UNION BUDGET FY16

Key budget measures

Outlays up by 50% : Bulk of the increase in roads (up 195%) and

railways (up 53%)

Push on metro rail projects and smart cities: 7 new metro projects to
be awarded in FY16

5 new UMPPs announced to be awarded with all clearances

Eased infra financing through formation of a National Infrastructure

Fund and Infra investment trusts. NIF has a potential of infra lending
of USD 30 bn through initial equity commitment of USD 3 bn

Resolution of contractual disputes: Setting up a regulator for resolution

of contractual disputes for public sector projects

Forward Markets Commission to be merged with SEBI. This will pave

the way for higher liquidity and market depth through introduction of
new products (options/indices) and institutional participation in
commodity exchanges in the long term

Impact

Positive: L&T, BHEL,

Thermax and
EPC companies

Positive: MCX

Commodity derivatives included in Securities Contract Regulation Act

28 FEB 2015

Sectoral impact: Summary

Sector

FMCG & Retail

Infrastructure

Excise duty on cigarettes hiked by weighted average ~18%

We expect ITCs cigarette volume to decline by ~8% in FY16 as we
expect 17% price hike. Earnings downgraded by ~3%

Reduction in excise duty on footwear was partly offset by lower

abatement charges

Increased allocation to MNREGA (up ~20% YoY) and GST roll out
from April16 is a positive

Allocation for transport up 1.7x led by roads and railways

PPP to be revisited and revitalized

PSU ports to be gradually corporatized

Service tax to be levied on amusement facility, entertainment events or

concerts, pageants, non-recognized sporting events etc.

Increase in clean energy cess on coal to Rs 200/ton (Rs 100/ton

currently)

Media

Metals/ Mining

UNION BUDGET FY16

Key budget measures

Strategy Report

Impact

Negative: ITC & cigarettes

players
Positive: Asian Paints,
Berger Paints and Bata

Positive for EPC companies,

and road developers like
ITNL, IRB and Ashoka
Buildcon
Negative:
Wonderla Holidays
No impact PVR and INOX
Leisure as it is not
applicable for Exhibitors
Neutral for Coal India, as it
will be passed on to
consumers
6

28 FEB 2015

Sectoral impact: Summary

Sector

Pharmaceuticals

UNION BUDGET FY16

Key budget measures

Lowering fuel subsidy provision to Rs 300 bn in FY16 (Rs 603 bn in

FY15), which reflects overall reduction in gross under-recoveries

Tweaking excise duties on petrol/ diesel (reducing basic duty and

hiking additional duty by same amount) keeping overall duty same

Cut customs duty on EDC/VCM/ Styrene to 2% from 2.5%. For

naphtha (used for excisable goods), customs duty cut to 2% from 4%

Continued expansion of Direct Benefit Transfer for LPG

Oil & Gas

Strategy Report

(1) Additional investment allowance at 15% and (2) additional

depreciation at 15% to new manufacturing units set up from 1st Apr
2015 to 31st Mar 2020 in notified areas of Andhra Pradesh (AP)
and Telangana
Companies having capex plans largely in AP and Telangana like
Aurobindo (capex of Rs 7 bn in FY15F), Divis (Rs 6 bn) and
Dr Reddys (Rs 10 bn) would gain given higher allowance and lower
depreciation

Impact
Neutral: for Oil PSUs as
Rs 300 bn implies
government subsidy share
at ~75%
Neutral: for OMCs as total
excise duty unchanged
Neutral: for refining/
petchem as domestic prices
are 10-15% premium to IPP

Positive Aurobindo, Divis,

Dr. Reddys

28 FEB 2015

Sectoral impact: Summary

Sector

Strategy Report

UNION BUDGET FY16

Key budget measures

Impact
Negative for IPPs selling

Power

Realty

Clean Energy Cess on coal increased to Rs 200/ton from Rs 100/ton

Provided exemption on long-term capital gains for sponsors and tax

pass through status to rental income at REIT level

Allocation for rural and urban housing increased in continuation to the

Govts Housing for all initiative (60 mn units to be built by 2022)

power on merchant basis

such as Adani Power,
JSW Energy, etc.
Neutral for NTPC
To improve liquidity for the
sector
Positive for developers
with strong annuity
portfolio like DLF, Prestige,
Phoenix and Oberoi

Increase in service tax (ST) to14% from 12.36%. ST is a pass through

and has no material impact on minutes (except for full talk time plans
where operators absorb the same)

Telecom

Phased reduction of corporate tax to 25%

Neutral: Bharti Airtel, Idea

Budget receipts pegged at ~Rs 429 bn in FY16 (Rs 432 bn in

FY15E). Budgetary receipts in line. ~Rs 230 bn will be from annual
regulatory levies and balance from additional 15 MHz of 2100
spectrum band

28 FEB 2015

Contents

Strategy Report

UNION BUDGET FY16

Page
Macro

10

Sectoral impact

14

Macro

10

28 FEB 2015

Tax measures: A mix of near term to longer term measures

Corporate Tax

Strategy Report

UNION BUDGET FY16

Rate to be lowered to 25% from 30% over the next 4 years

However, this will be accompanied by a phased reduction exemptions

Peak Customs duty unchanged, selective tweaks

Customs duty

Metallergical coke from 2.5% to 5%

Tariff rate on iron and steel and articles of iron and steel increased from 10% to 15%
Tariff rate on commercial vehicle increased from 10% to 40%

Excise duty

Central Excise duty increased to 12.5% from existing 12.36%

FMCG: Excise duty increased by a blended ~18% on cigarettes

Rate increased to 14% from 12.36%

Service Tax

Direct/
Other taxes

Negative Service tax list pruned. Services of pre-conditioning, pre-cooling, ripening etc. of fruits and
vegetables, Life insurance service provided by way of Varishtha Pension Bima Yojana, All ambulance
services provided to patient
Limit of deduction of health insurance premium increased from Rs15,000 to 25,000, for senior citizens limit
increased from Rs 20,000 to Rs 30,000
Limit on deduction on account of contribution to a pension fund and the new pension scheme increased from
Rs 1 lakh to 1.5 lakh
Additional deduction of Rs 50,000 for contribution to the new pension scheme u/s 80CCD

GST rollout from Apr 1, 2016 reiterated

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28 FEB 2015

Broader numbers seem realistic with some buffer built in on excise

UNION BUDGET FY16

FY15
BE
13, 64 5

F Y15
RE
12, 514

Variance
15R E/
15B E (% )
(8)

C hg Yo Y
15R E/
14 R E (% )
10

FY16
BE
14 , 4 95

C hg Yo Y
F Y16BE/
F Y15 R E (% )
16

4,510
2,843
2,071

4,261
2,786
1,855

(6)
(2)
(10)

8
15
9

4,706
3,274
2,298

10
18
24

Customs duty
Service tax
Dev o lv ement to S tat es & Unio n
T errito ries

2,018
2,160
3, 873

1,887
1,681
3, 4 29

(6)
(22)
(11)

10
9
6

2,083
2,098
5, 296

10
25
54

Net t ax rev enues

Non tax revenues (incl dividend, interest, etc)
Non-debt capital receipts (incl divestment)

9, 773
2,125
740

9, 085
2,178
422

(7)
3
(43)

11
10
1

9, 198
2,217
803

1
2
90

No n p l an rev enue exp endit ure

Interest
Defense
Sub s idies

11, 14 6
4,270
1,344
2, 607

11, 219
4,114
1,404
2, 667

1
(4)
4
2

10
10
13
5

12, 060
4,561
1,521
2, 4 38

7
11
8
(9)

Non plan capital expenditure

Pl an Exp enditure
T o t al Exp enditure

1,053
5, 750
17, 94 9

913
4 ,679
16, 812

(13)
(19)
(6)

5
3
8

1,062
4 , 653
17, 775

16
(1)
6

(5,312)
(4 . 1)

(5,126)
(4 .1)

(R s b n)
Gro s s T ax R ev enue
Corporation tax
Income tax
Excise duty

Fiscal deficit
Fiscal % of GDP

Strategy Report

C o mment s
T ax rev enues realistic l ed b y excise &
serv ice tax

Lower than anticipated excise from petrol/ diesel

implies a sizable buffer
Increase in tax rate, but negative list pruned a bit

Net rev fl at sesp ite 16% gro ss rev enue

Divestment fig of Rs 690 bn incl HZL & Balco &
SUUTI
Benefits of softer int rate regime
F oo d & fert il iser sub sidies l argel y flat
(o v erdue arrears ), co unt ing o n b enefit s
fro m crude
Largely defence
Exp enditure gro wth target stiff wrt
hist o ric al rates

(5,556)
(3. 9)

Nominal GDP growth at ~11.5% assumption either presumes high real GDP growth rate or lower than expected
inflation rate. Expenditure switching from consumption to Infra is a much needed qualitative change. However,
govt spending increase of just 6% YoY may require steady hands with just 1% net tax revenue growth
12

Strategy Report

28 FEB 2015

Yields to remain range bound in the short term

System liquidity : Demand-supply dynamics to be comfortable
F Y15 R E

Net borrowings contained at just 82% of fiscal deficit

F Y16 B E

Net market borrowings

Net Govt borrowings

State govt borrowings

4,469
1,600

4,564
1,800

Total govt requirement

S o urce o f funds

6,210

6,364

Bank SLR
Insurance

2,404
1,800

3,021
1,944

2,000

MFs, PFs & FIIs

Availability for govt

1,000
5,460

1,150
6,115

1,000

Net difference
Key assump tio ns

(750)

(249)

(87)

(82)

Net govt borr as % fiscal deficit

5,000

Borr/ Deficit (RHS)

(%)

(Rs bn)

4,000

120
90

3,000

60
30

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

Particulars
Demand fo r funds

UNION BUDGET FY16

Note: Deposit & Credit growth assumed at 14% for FY16

Fiscal deficit targets revised from 3.6%/ 3% of GDP in FY16/ 17 to 3.9%/ 3.5%/ 3% in FY16/ 17/ 18 respectively

Despite slightly higher than expected fiscal & revenue deficit target , net borrowing of Rs 4.5 trn is lower

We expect a manageable demandsupply mismatch ~ Rs 250 bn in FY16

13

Sectoral impact

14

28 FEB 2015

Auto

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

Increased allocation (>2x) towards road

Current year allocation

Positive for CV demand, esp. tippers;

construction activity to Rs 950 bn

Allocation to MNREGA increased to Rs 400 bn

and long-term measures to improve farmer

productivity/income
Overall defense capex increased 15% YoY to

Rs 950 bn. For MHCV procurement, outlay

increased 10% YoY to Rs 21.3 bn
Custom duty on completely built imported CVs

increased to 40%. CKD (completely knocked

down) duty remains unchanged at 10%
Measures to increase income tax exemption for

at Rs 420 bn

Current year MNREGA

allocation at Rs 325 bn

Current year allocation

at Rs 820bn (MHCV at
Rs 18.6 bn)
Current custom duty on

imported CVs at 10%

Ashok Leyland is a dominant player

Positive for 2Ws (as it supports rural

wages) and tractors (as it aids farm

mechanization)
Positive for players with defense

exposure: Ashok Leyland, Bharat Forge

Positive for CV OEMs. While imported

CVs form a negligible portion of industry,

it allays recent fears of Chinese dumping
Positive for 2Ws and small cars

individuals (cumulatively by Rs ~75k p.a.)

Budget was somewhat a non-event (expected) as excise duty was increased pre-budget itself
15

28 FEB 2015

Banks and NBFCs

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Fungibility of FDI and FII limits. Overall foreign

limit at 74% for private banks and 20% for

PSU banks

SARFAESI Act benefit extended to NBFCs

FII limit was restricted at

49% and overall foreign

limit at 74% for private
banks

Currently applicable only

for banks and HFCs

Establishing Bank Board Bureau.

New initiative

Path towards creation of Holding Company

structure for PSU banks

Capital allocation for PSU banks at Rs 79 bn

Impact
Positive: Possibility of higher FII

participation and inclusion in global

indices
Key beneficiaries: Axis Bank, Yes Bank

Positive: Key beneficiary - LT Finance,

Bajaj Finance, Shriram Transport,

Cholamandalam Finance,
Mahindra Finance
Neutral: This will help in appointment of

top management and capitalization of

PSU banks . We believe this will take time
and execution of the process needs to be
watched out for
Rs 69 bn provided in

FY15YTD (allocation was

Rs 112 bn in FY15)

Negative for PSU banks as significant

capital requirement (~Rs 2.4 trn needed

by FY18)

Fungibility of FDI and FII limits is positive for private banks

16

28 FEB 2015

Banks and NBFCs

Budget proposal
Reduction in Corporate Tax rate to 25% from 30%

over 4 years

Agri loans target at Rs 8.5 trn

UNION BUDGET FY16

Current status
Most BFSI companies are

full tax paying with

limited exemption

Previous budget target

was Rs 8 trn. Current

agri loan book at
Rs 7.5 trn
Higher exemption on health insurance premium

Strategy Report

Tax exemption limit

increased to
Rs 25,000 from
Rs 15,000 for individuals
and to Rs 30,000 from
Rs 25,000 for senior
citizens

Impact
Positive: 5% reduction in tax rate for full

tax paying private banks will their improve

RoA by ~10 bps ; ~5 bps for PSU banks

Neutral: No significant increase in

agriculture credit target

Neutral: Marginal positive impact for

SOTP plays Max India, Reliance

Capital, Bajaj Finserv, Religare Enterprises

17

28 FEB 2015

Capital Goods, EPC and Power

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

National Infrastructure Fund (NIF) of USD 3 bn

No such financing

Positive for Capital Goods and EPC cos

with potential infra lending of USD 30 bn

Infrastructure investment trusts will enable private

developers to free up capital to take new projects

Increased outlay on road for FY16 by 194% to

mechanism earlier
No such financing

mechanism earlier

Positive for L&T, Sadbhav and other

asset owners

FY15 at Rs 281bn

Positive for EPC companies

FY15 at Rs 643 bn

Positive for L&T, Simplex, Siemens, etc.

FY15 at Rs 98 bn

Positive for L&T, J Kumar, BEML, Siemens,

Rs 827 bn on higher proportion of EPC orders

Increased expenditure on railways for FY16 by

53% to Rs 984 bn
Metro rail to award 7 new projects. Increased

Simplex etc.

outlay for FY16 by 18% to Rs 116 bn

5 new UMPPs of 20 GW to be awarded with all

Earlier plan of 2 UMPPs

Positive for BHEL, L&T, Thermax

No regulator earlier

Positive for Capital Goods and EPC

clearances - plug and play model . Timeline not

specified
Regulator for resolution of contractual disputes for

public sector projects

companies

Increased outlay for roads and railways POSITIVE for L&T and EPC companies
18

28 FEB 2015

Capital Goods, EPC and Power

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

Clean Energy Cess on coal increased to

Cess charged at

Negative for IPPs selling power on

Rs 200/ton

Power T&D expenditure at Rs 49 bn

Rs 100/ton

~ Rs 39 bn spent on

such schemes in FY15

merchant basis such as Adani Power,

JSW Energy, etc.
Neutral for NTPC
Positive for power gencos as higher

capex helps reduce T&D losses

19

28 FEB 2015

Capital Goods, EPC and Power

Strategy Report

UNION BUDGET FY16

Capex for key schemes

(Rs bn)
Defense
Railways
Metro (Under MoUD)
Roads (MORTH)
Rural Roads (PMGSY)
Urban Infra (JNNURM)
Renewable Energy
IPDS (earlier APDRP)
DDUGJY (earlier RGGVY)
Total
Growth (%)

FY14
791
529
82
287
90
107
11
6
29
1,93 4

FY15
820
643
98
281
144
158
18
7
32
2,201
13.8

FY16
946
984
116
827
143
211
24
6
43
3 , 299
49.9

Growth YoY (% )
FY15/FY14
FY16/FY15
4
15
22
53
19
18
(2)
194
59
(1)
48
34
57
34
6
(14)
10
33

Source: Budget documents

20

28 FEB 2015

Commodities

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

Cement
Increased spending on Infrastructure and housing
Outlay for road transport increased 3x to
Rs 830 bn in FY16
60 mn new houses by 2022 in rural and
urban areas
Plans to revisit and revitalize PPP mode of
infrastructure

Positive: Industry would benefit from

Metals
Clean energy cess on coal
Increase to Rs 200/ton

Rs 100/ton

higher volume growth

Neutral for Coal India, as it will be

passed on to consumers

21

28 FEB 2015

FMCG & Retail

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

Excise duty on cigarettes

18% weighted average increase for cigarettes
portfolio of ITC. Excise duty has been hiked by
25% for 64 mm cigarettes, which is a price
sensitive segment. Excise hike in other segments
has been increased by 15%

Multi-slab excise

Negative for ITC and other cigarettes

Increased allocation for MNRGEA by 15-20%

Highest ever allocation at Rs 400 bn

MNREGA allocation at

GST to be rolled out from April 16

GST has been deferred in the past due to lack of
political consensus. Introduction of GST will benefit
branded FMCG players by (a) creation of level
playing field , (b) reducing cascading impact of
taxes, (c) widening of tax compliance and
(d) improved efficiency in supply chain

structure. Previous three

years have seen18%-+
p.a. increase in
excise duty

Rs 350 bn last year

players. Cigarettes volume expected to

decline by ~8% (vs. earlier est. of flat
growth) in FY16 on17% price hike.
Earnings downgraded by ~3%.
Expect stock to derate
Positive for FMCG companies especially

rural focus players such as HUL, Dabur,

Colgate etc. Higher allocation will
support rural wages and boost rural
consumption
Positive for branded FMCG players,

especially Paints (Asian Paints, Berger

Paints). Clarity on GST rate and inclusion
of excise exempt categories such as
edible oil will be key to determine benefit
for other players. However, benefit to
flow from FY17

Fourth consecutive year of over 18% excise hike on cigarettes;

GST implementation from April16 a positive
22

28 FEB 2015

FMCG & Retail

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

Reduction in excise duty for leather footwear:

Over Rs 1,000 per pair reduced from 12% to 6%
Abatement for footwear reduced from 35%
to 25%

Footwear
< Rs 500/pair at 0%
> Rs 500 but
< Rs 1,000/pair at 6%
> Rs 1,000/pair at 12%

Positive for Bata. However, excise duty

Service Tax increase to 14%

Currently at 12.36%

Neutral for Retail players like Shoppers

reduction will be partly offset by lower

abatement charges. Increase earnings by
2% to factor the same

Stop, Titan, Westlife Development, as we

expect the companies to pass on the
increase in tax to consumers
Introduction of Gold Monetization scheme to
replace present schemes such as Gold Deposit and
Gold metal Loan Schemes

Positive development for jewellery

companies like Titan. The scheme will

make available domestic gold to jewelers
by taping into Indias stock of unused
gold (20,000 tonnes), reduce gold
imports and cost associated with it. The
scheme will also reduce smuggled gold
and enable a level playing field for
organized and unorganized players

23

28 FEB 2015

Infrastructure (overall allocation for transport up 1.7x at Rs 1,934 bn)

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

Allocation of Rs 850 bn to Roads ministry (up by

Only ~2,000 kms

Positive for road developers and EPC

Rs 470 bn vs. FY15BE). Bulk of increase from

Internal and Extra Budgetary resources (up by
Rs 337 bn vs. FY15BE)
PPP to be revisited and revitalized sovereign will

have to bear a major part of risk

PSU ports to be gradually corporatized, thereby

attract investments and leverage available land

Establish National Investment and Infra Fund

(NIIF), and infuse Rs 200 bn pa. It will enable

Trust to raise debt, and invest in infra finance cos
Tax free infra bonds for rail, road & irrigation
InvITs Exemption of long term capital gains for
sponsors
Government would consider plug-and-play

projects in roads, ports, rail lines, airports etc.

awarded vs. 5-year

average of 3,500 kms

PPP financed/executed

primarily by pvt. players

PSU ports capex has

lagged plans, benefitting

private ports
Infra debt funds and tax

free bonds to incentivize

investment in infra
Issues of double taxation
resulting in lower yields

players. Announcement along expected

lines as going forward 80% projects to
be funded by govt (50%+ by PPP earlier)
Positive for Road owners like ITNL, IRB if

NHAI provides more grant

Positive for EPC players, PSU ports in

medium term
Negative for private ports in long term
Positive for Asset owners like GMR,

Adani Ports, ITNL, IRB, Gujarat Pipavav

as it may ease availability of funds
Clarity on DDT at SPV level awaited for

InvITs
EPC companies/

developers have to
secure all clearances

Positive for entire space as it would

ensure more predictable timelines

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28 FEB 2015

Oil & Gas

UNION BUDGET FY16

Budget proposal

Current status

Fuel subsidy provision at Rs 300 bn in FY16

Subsidy provision was

Rs 603 bn in FY15. The

decline reflects reduction
in gross under-recoveries
Tweaking excise duties on petrol/ diesel keeping

overall duty unchanged (reducing CENVAT by

Rs 3.5/3.7/ltr, reducing educational cess to zero,
and hiking additional duty proportionately)
Customs duty on naphtha (for use in manufacture

of excisable goods)/ EDC/VCM/ Styrene cut to

2%. HDPE for use in manufacture of telecom fibre
cables to Nil

Continued expansion of Direct Benefit Transfer for

LPG (DBTL)

Strategy Report

Overall excise duty on

petrol and diesel at

Rs 17.5 and Rs 10.3/ ltr
respectively (unchanged)

Impact
Neutral: for Oil PSUs as Rs 300 bn

includes Rs 120 bn for Q4FY15, leading

to Rs 180 bn for FY16, which represents
~75% of FY16 gross u/r at Rs 240 bn
Neutral: for OMCs as total excise duty

unchanged

Customs duties
Naphtha: 4%
EDC/VCM/ Styrene:
2.5%
HDPE: 7.5%

Neutral: for refining/ petchem

Refiners: Reduction in naphtha duty will

Of total 150 mn LPG

Marginally positive for oil PSUs as LPG

users, 100 mn have

already joined DBTL

have negligible impact on GRMs

Petchem players: Domestic prices are at

10-15% premium to IPP. Hence,

realizations unlikely to get impacted

subsidy will reduce

Neutral for budget as no wide changes in duty structure are announced

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28 FEB 2015

Real Estate

Strategy Report

UNION BUDGET FY16

Budget proposal

Current status

Impact

Clarity on taxation for REITS:

Exemption of long-term capital gains for sponsors
Rental income accorded tax pass through status
at REIT level

Issues of double taxation

Positive for developers with strong

Housing for all by 2022

Increased planned outlay of Rs 100 bn for rural
housing and Rs 56 bn for urban housing in FY16

Allocation of Rs 80 bn

resulting in low yields

and Rs 40 bn for rural

and urban housing
in FY15

annuity portfolio. However, need

clarity on DDT at SPV level to make
REIT structure efficient
Key beneficiaries: DLF, Phoenix Mills,
Prestige Estates and Oberoi Realty
Positive for all developers,

especially affordable/ mid-income

housing players

Step closer to implementation of REITs; however clarity on DDT at SPV level awaited
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