Showing posts with label Budget 2009-10. Show all posts

PART-3 PRE-BUDGET 2009-10

Posted by sandip lakhani in

Sector: Oil and Gas

Particulars: Tax Holiday for gas production

Current Status: There is 7 year tax holiday on oil production but there is no clarity on gas production

Proposed measures: 7 year tax exemption also given for the gas production

Impact (on sector & major stocks): Positive for Reliance Industries, ONGC and Cairn India.

Sector: Real Estate

Particulars: Interest deduction on housing loan

Current Status: Rs 1.5 Lakh

Proposed measures: Rs 2-2.5 Lakh

Impact (on sector & major stocks): Positive To stimulate demand from housing sector

Particulars: Concessional housing loan

Current Status: up to Rs 20 lakh

Proposed measures: up to Rs 30 lakh

Impact (on sector & major stocks): To stimulate demand from housing sector

Sector: Textile

Particulars: Repayment of term loans

Current Status: Currently moratorium is available for initial 1-2 years

Proposed measures: 2 year moratorium on repayment of term loans

Impact (on sector & major stocks): Companies with high debt like Alok Industries, Bombay Rayon Fashions, Vardhman Textiles, Welspun India would benefit

Particulars: Repricing of cotton

Current Status: Domestic prices higher than international prices

Proposed measures: Align domestic cotton price with international price

Impact (on sector & major stocks): Companies using cotton as raw material like Alok Industries, Bombay Rayon Fashions, Vardhman Textile, Welspun India would benefit

Particulars: Withdrawal of excise duty on manmade fibers

Current Status: 4%

Proposed measures: 0%

Impact (on sector & major stocks): Positive for most of the players in the manmade fiber segment

Particulars: Incentives to exporters

Current Status: 2%

Proposed measures: Align Restoration of 4% interest rate subsidy on bank loans of exporters

Impact (on sector & major stocks): Positive for exporters

Sector: Telecom

Particulars: License charges on revenue share basis

Current Status: There 10% of AGR adjusted gross revenue) in metros and A category circles, 8% of AGR in B category and 6% of AGR in C category circles.

Proposed measures: Single levy of 6% of AGR in all the circles.

Impact (on sector & major stocks): Bharti Airtel, Idea Cellular, Rcom, Spice Communications and MTNL

PART-2 PRE-BUDGET 2009-10

Posted by sandip lakhani in

Sector: Media

Particulars: Service tax (Broadcasting)

Current Status: 12.24% service tax is levied on Broadcasters and not on the print media companies

Proposed measures: Services Tax to be in line with the print media for broadcaster. However, we do not expect any changes.

Impact (on sector & major stocks): Benefit for all the broadcasting companies like ZEE Entertainment,TV18, Sun TV

Particulars: Service tax (Multiplexes)

Current Status: 12.36% services tax is levied.

Proposed measures: Removal of 12.36% services tax or allowed to set off against sales tax. We expect this to remain unchanged

Impact (on sector & major stocks): Benefit PVR, INOX, Cinemax, Fame.

Particulars: Custom Duty Current Status: 12.5% duty charged on Broadcasting equipments

Proposed measures: To be eliminated. We expect this to reduce.

Impact (on sector & major stocks): WWIL, Dish TV

Sector: Metals

Particulars: Import duty on steel

Current Status: Import duty of 5% on finished steel products

Proposed measures: Hike in import duty to 15% for flat products and 10% on long products

Impact (on sector & major stocks): Domestic steel producers would benefit on better demand and sales prospects. JSW Steel, Tata Steel would be major beneficiaries

Particulars: Import duty on non- ferrous metals

Current Status: Import duty of 5% on aluminum and zinc and 3% on copper

Proposed measures: Hike in import duty up to 10% for aluminum and zinc and up to 5% on copper

Impact (on sector & major stocks): Domestic non-ferrous metal producers would benefit. Major beneficiaries: NALCO, HINDALCO, Sterlite Industries, Hindustan Zinc etc.

Particulars: Impacts from measures on real estate and automobiles

Current Status: Present tax exemption of 1.5 lakhs on home loan; Excise duty of 12% and 20% different automobile categories

Proposed measures: Tax exemption is likely to be hiked to 2-2.5 lakhs; Excise duty is likely to be cut to at least 10% and 16% on different automobile categories

Impact (on sector & major stocks): Indirect positive impact on metal companies regarding Improvement in demand

Sector: Power

Particulars: Depreciation Proposed measures: Accelerating the rates of depreciation in the initial years

Impact (on sector & major stocks): Accelerated depreciation to provide tax savings to companies incurring capex, thereby providing additional incentive to the sector.

Particulars: Benefit under Section 80IA

Current Status: Benefit to the projects starting till March 2010

Proposed measures: Extension of the deadline

Impact (on sector & major stocks): Will increase the investments in the sector. The new proposals
sanctioned will take around three to five years to commence operations.

Particulars: Allocation from the Government

Proposed measures: To hike its allocation to stateowned power companies NTPC, NHPC and Power Grid Corp

Impact (on sector & major stocks): Will lead to increased spending by the power companies.

PRE-BUDGET 2009-10

Posted by sandip lakhani in



The government is presenting the Vote-on-Account (more like an interim budget) on 16th of Feb, 2009. This is to take the approval of the parliament to withdraw money from the consolidated central government fund to meet expenditures till the elections are over and the new government takes over. This being the last budget of the out-going government before the election commission announces the date for general elections; the government may announce populous measures. But the government may refrain from making any drastic policy changes. Limited revenues and rising expenditures leave little room for the government to go for more fiscal stimulus in terms of higher spending. Continuing the measures in the previous few years’ budgets, infrastructure investment and employment generation may continue to get higher thrust. But as the government may refrain from making any policy decision changes, it may focus on consolidating the earlier announced measures as well as boosting the reeling sectors. Moreover, the government may also tweak the indirect taxes (excise and customs duty) for various sectors as they don’t require the parliament approval and can be changed at any time.

Sector specific expectations:

Sector: Auto

Particulars: Excise duties

Current Status:

• 12% on small cars (length not exceeding 4,400 mm and engine capacity not exceeding 1,200 petrol (petrol, LPG and CNG) /1,500 cc (diesel)
• Big cars - 20%
• Two- Three wheelers -12%

Proposed measures:

• Cut in excise duty to 10%
• Cut in excise duty to 16%
• Cut in excise duty to 10%

Impact (on sector & major stocks):

• Push the demand for vehicles.
• Demand driver
• Support demand growth

Sector: Banking

Particulars:

• Income tax on Interest income from banks, exemption limit to be reimposed
• Raising limit of tax exemption on interest payment of housing loans

Current Status:

• No exemption on income tax is there in current status
• Current limit – Interest payment-Rs150000

Proposed measures:

• To reinstate Rs.12000 - Rs.15000 of exemption in interest income from taxation
• Expected limits to increase deduction of Rs.150000 to Rs 200000 or Rs.250000

Impact (on sector & major stocks):

• Will help banks to garner more deposits and mange asset liability mismatch as currently with term deposits are falling continuously making them less attractive going forward All banks to benefit
• Beneficial for housing finance companies, banks as credit demand for housing will rise and as real estate demand is again restored, rising risk of NPA's is less. Stocks- HDFC, LIC Housing Finance & large banks like SBI to benefit.

Sector: Cement

Particulars: Excise duties

Current Status: 8% on MRP Big cars - 20%

Proposed measures: Abatement on MRP for calculating Excise duty

Impact (on sector & major stocks): The benefit is likely to be passed by cement industry in medium term by reducing cement prices

Particulars: Import duty

Current Status: Nil

Proposed measures: Re imposition of Import duty

Impact (on sector & major stocks): To benefit north Indian cement co.

Sector: Hotels

Particulars: Inclusion of hotel Industry under infrastructure sector

Current Status: Currently Hotel projects are considered as "Real Estate" rather than "Infrastructure projects"

Proposed measures: Hotels to be given "Infrastructure" status under Sec 80-IA of Income Tax Act.

Impact (on sector & major stocks): This would enable hotels to access cheaper debts.

Particulars: Tax Holidays

Current Status: Tax holidays is currently available u/s 80-ID for new hotel projects of a particular category and is valid for Delhi-NCR to boost common wealth games infrastructure

Proposed measures: Extend the benefits of the section 80-ID to other parts of India

Impact (on sector & major stocks): Will be beneficial for all Hotel projects in India

Particulars: Service Tax on tour packages

Current Status: Currently 12.5% of service tax is levid on tour packages

Proposed measures: Reduction / cancellation of service tax on tour packages

Impact (on sector & major stocks): Will make Indian tour packages more competitive in term of price compared with other south Asian destination, which would help in boosting tourism business in India.