Union Budget

Review
2019-20

Investment friendly Budget...

Budget Preview 2019-20E: “Investment friendly Budget”…

Union Budget 2019-20 was an “investment friendly Budget” wherein the long term plan for attaining US$5 trillion GDP by 2025 was laid out, to create a conducive ecosystem with
focus on overall demand creation, raising intellectual and financial capital and labour. The shift from traditional template of focusing more on headline revenue and expenditure

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segment to a segmental detailed plan of action was a welcome change and reflected as an apt mix of reform focus, pragmatic and inclusive strategic intent. Other key positives
were containing fiscal deficit target to 3.3% of GDP (vs. 3.4% built in interim Budget) and much needed higher recapitalisation allocation of ~| 70000 crore for PSU banks.
Moreover, some long term sustainable efforts, especially in terms of focus on EV manufacturing and providing tax relief for the same, could go a long way in containing oil & oil
product import bill, which is currently at US$141 billion.
The government is looking to push the investment on three broad themes: i) sustainable living – Promotion of electric vehicles & renewable energy, ii) rationalising duty structure
to promote Make in India and iii) Ease of Living through higher infrastructure spending. On the EV front, the government proposes to incentivise purchase of electric vehicle
through income tax exemption on financing costs as well as provide tax incentive for establishing quite essential Li-On battery manufacturing unit. On the Make in India front, the
focus is on rationalisation of duty structure through increased custom duty on finished goods and lowering custom duty on key raw material, which are in short supply
domestically. On the infrastructure front, the government has set an ambitious plan of annual infra spend of | 20 lakh crore p.a. vs. the present run rate of | 7-8 lakh crore p.a.
Developing intellectual capital by increasing the spends towards the higher education and skill development, the government is preparing the youth to enhance their skills in
language training, Artificial Intelligence (AI), Internet of Things, Big Data, 3D Printing, Virtual Reality and Robotics.
The government has proposed to include shareholding of government controlled companies like LIC in calculation of 51% government stake. This move has the potential to raise
money to the extent of ~ | 289000 crore in listed PSU companies, which can be utilised for financing of the massive infrastructure investment outlays. The government has decided
to start raising a part of its gross borrowing programme in external markets in external currencies. It is likely to improve the demand-supply dynamics in the government securities

ICICI Securities – Retail Equity Research

market thereby providing space to private sector to tap debt markets for their capacity expansion plans. This we believe will lead to a change in Modus Operandi for financing
infrastructure.
With the government proposal to raise public shareholding threshold from 25% to 35% in listed companies, the potential amount that can be raised from private companies could
be as high as | 2 lakh crore. While the move is aimed at wider public participation in equities, the overall supply may have a near term overhang. We expect Sebi to implement it
in a phased manner.

Key Performance Highlights of the Budget 2019-20

• Factoring in the moderation in economy, the government has lowered its GST and direct tax collection target by | 98000 crore and | 51000 crore, respectively. However, this
shortfall is likely to be met via higher-than-expected budgeted excise (duty hike & infra cess on petrol and diesel) and customs duty (to promote “Make in India” initiative) to the
tune of | 40000 crore and | 10000 crore, respectively. As anticipated, non tax revenues like disinvestment proceeds (| 15000 crore), higher dividend income ( | 27500 crore) and
lower share of states in taxes (| 36000 crore) will account for the remainder of the shortfall in GST and direct tax revenues

• Capital expenditure has been pegged at | 338570 crore. However, at the same time respectable allocation has been made to infrastructure segments like railways (up 24%),
housing (15%), defence (8.7%). Also, the decision of the government to borrow from foreign sources for funding deficit is a clear indication that it does not want to crowd out
private sector from raising financial resources so as to fund capex investment. The IEBR expenditure has been pegged at | 537000 crore for FY20BE. The IEBR support to segments
like roads (| 75000 crore), railways (| 94000 crore ) and introduction of PPP model of infra asset creation is a clear indicator that the road to $5 trillion economy will be via
infrastructure creation
July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 2
Fiscal deficit contained at 3.3% despite challenges…

Government Revenue & Expenditure

Particulars FY15A FY18 FY19RE YoY (%) FY20IE* YoY (%) FY20BE YoY (%) Comments

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Direct Taxes 1001974 1200000 19.8 1380000 15.0 1335000 11.3
Factoring in the moderation in economy, the government has lowered its GST and direct tax
collection target by | 98000 crore and | 51000 crore. However, this shortfall is likely to be met via
Indirect Taxes & Others 917034 1048175 14.3 1172131 11.8 1126195 7.4 higher-than-expected budgeted excise and customs duty to the tune of | 40000 crore and | 10000
crore, respectively. As anticipated, non tax revenues like disinvestment proceeds (| 15000 crore),
Gross Tax Revenues 1919008 2248175 17.2 2552131 13.5 2461195 9.5 higher dividend income (| 27500 crore) and lower share of states in taxes (| 36000 crore) will
Less: State Shares 676520 763769 12.9 847085 10.9 811613 6.3 account for the remainder of the shortfall in GST and direct tax revenues
Net Tax revenue 1242488 1484406 19.5 1705046 14.9 1649582 11.1
Non Tax Revenues
Dividend 91361 119265 30.5 136071 14.1 163528 37.1
On the dividend front, public sector enterprises and RBI payouts are at ~| 57487 crore and ~|
Economic services 61369 89654 46.1 94662 5.6 104729 16.8
106042 crore, respectively, for FY20E
Others 40014 36357 (9.1) 41914 15.3 44922 23.6
Total Revenue Receipts 1435232 1729682 20.5 1977693 14.3 1962761 13.5
Capital Receipts
Recovery of Loans 15633 13155 (15.9) 12508 (4.9) 14828 12.7
The disinvestment target optically looks high but given the previous track record over FY17-19, we
Disinvestments 100045 80000 (20.0) 90000 12.5 105000 31.3

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expect the target to be achievable
Total 115678 93155 (19.5) 102508 10.0 119828 28.6
Total Receipts 1550910 1822837 17.5 2080201 14.1 2082589 14.2

Scheme Expenditure: 873233 1041645 19.3 1187859 14.0 1202405 15.4

On Revenue Account 627132 765470 22.1 887374 15.9 900204 17.6
On Capital Account 246100 276175 12.2 300486 8.8 302201 9.4
Exp other than Schemes: 739790 828020 11.9 931279 12.5 923473 11.5
On Revenue Account 722751 787571 9.0 895472 13.7 887105 12.6
On Capital Account 17039 40449 137.4 45493 12.5 36368 (10.1) Capital expenditure has been pegged at | 338570 crore but at the same time respectable allocation
Interest payments 528952 587570 11.1 665061 13.2 660471 12.4 has been made to infrastructure segments like railways (up 24%), housing (15%), defence (8.7%).
Also, the decision of the government to borrow from foreign sources for funding deficit is a clear
Total Expenditure 2141975 2457235 14.7 2784200 13.3 2786349 13.4 indication that government does not want to crowd out private sector from raising financial
resources to fund capex investment
Fiscal deficit 591065 634398 7.3 703999 11.0 703760 10.9
Primary Deficit 62113 46828 (24.6) 38938 (16.8) 43289 (7.6)
The government has pegged a nominal GDP growth of 12% for FY20BE, which implies real GDP
GDP estimates 16784679 18840731 12.2 21007439 11.5 21100607 12.0
growth of 8%
Fiscal deficit as % of GDP 3.5% 3.4% 3.4% 3.3%
* Estimates as per Interim budget

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 3

Investment push for sustainable living, indigenisation and Ease of Living

The government is looking to push the investment on three broads themes: i) sustainable living – Promotion of electric vehicles & renewable energy, ii) rationalising duty structure to
promote Make in India and iii) Ease of Living through higher infrastructure spending. On the EV front, the government proposes to incentivise purchase of electric vehicle through

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income tax exemption on financing costs as well as provide tax incentive for establishing quite essential Li-On battery manufacturing unit. On the Make in India front, the focus is on
rationalisation of duty structure through increased custom duty on finished goods and lowering custom duty on key raw material, which are in short supply domestically. On the
infrastructure front, the government has set an ambitious plan of annual infra spend of | 20 lakh crore per annum vs. the present run rate of | 7-8 lakh crore per annum.

Sustainable Living Make in India Ease of Living

The government has planned for

Electric Vehicles
• Income tax exemptions
under Section 35 AD of
Renewable Energy
In order to achieve net zero import,
the government aims to promote
domestic manufacturing through
• To meets its Nationally rationalisation of duty structure. In
Total capex worth | 8.76 lakh crore in
FY20 - ~| 3.4 lakh crore gross
budgetary support and | 5.38 lakh
crore through Internal External
Budgetary Resources (IEBR)

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the Income Tax Act for Determined Contribution ( that regards, Union Budget 2019-20
mega-manufacturing NDC) under Paris Agreement, proposes a few key changes:- The key highlights of budget on
plants in sunrise sectors India is undertaking one of infrastructure spending:
like lithium storage the world’s largest renewable • Hike in various finished products
batteries, etc energy expansion such as auto ancillary parts (250 • Launch of Pradhan Mantri Gram
programmes in the world to 500 bps) and electronic Sadak Yojana Phase-III under
• Government aims to products (500 to 1000 bps) which 1,25,000 km road length
create manufacturing • India is aiming to add 175 GW envisaged to be upgraded at
capacity of 50 GWhr in EV of renewable energy capacity • Increasing the ambit of lower estimated | 80,250 crore
battery space at an by 2022 and ~500 GW of corporate tax rate (25%) for • Proposed additional deduction
investment of US$50 renewable capacity by 2030 MSME sector covering 99.3% of of | 1,50,000 (total | 3,50,000)
billion by 2025 all companies in India for interest on affordable
• It entails investment of housing (ticket size: | 45 lakh)
• Personal income tax US$330 billion till 2030 • Interest rate subsidy of 2% for • in the second phase of PMAY-G,
exemption up to | 1.5 implying annualised GST registered MSMEs, Budget 1.95 crore houses are expected
lakh on interest paid on investment of US$30 billion allocation at | 350 crore to be completed vs. 1.54 crore
purchase of electric per year over the next decade houses in previous five years
vehicle

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 4

Endeavour to address environmental issues with focused approach

Under Phase-II of FAME Scheme, the government has proposed an outlay of | 10,000 crore for three years to encourage faster adoption of electric vehicles by way of offering upfront
incentive on purchase of electric vehicles and also by establishing the necessary charging infrastructure for electric vehicles. The emphasis is to provide affordable & environment

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friendly public transportation options

To make electric vehicle affordable to consumers, the government has proposed to provide additional income tax deduction of | 1.5 lakh on interest paid on loans taken to purchase
electric vehicles. This amounts to a benefit of around | 2.5 lakh over the loan period to taxpayers who take loans to purchase electric vehicle

Approximately 35 crore LED bulbs have been distributed under UJALA Yojana leading to cost saving of | 18,341 crore annually. The government has proposed to use the approach of
mission LED bulb method to promote the use of solar stoves and battery chargers in the country

According to BEE study, overall energy saving has resulted in cost saving of | 53000 crore in FY18 and contributed in reducing 108.3 million tonnes of CO2 emission. The contribution is
largely from three major programmes PAT (perform, achieve, trade), Ujala and standard & labelling programme

The overall size of the energy efficiency market in India is estimated to be US$22.81 billion [Energy Efficiency Services (EESL’s Business Plan, 2016-2021)], which could reduce
significant amount of CO2 emission. Realising the potential, the government with BEE in the lead has undertaken a number of schemes for promoting energy efficiency in various
sectors across India

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Contribution by programme-type in reduction in CO2 emission Contribution by programme-type in cost savings of | 53000 crore

4%
5%
24% 29%

37%
45%

34% 22%

UJALA PAT Standard & Labelling Others

UJALA PAT Standard & Labelling Others
Source: Economic Survey 2019
July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 5
 Focus on making India Inc job creators, national wealth creators

• In the last two Budgets, the focus of this government has been on increasing the The government is planning to bring in a New National Education Policy to transform India’s higher
creation of intellectual capital by increasing spends towards higher education and education system to one of the best global education systems. The government has announced a

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skill development programme ‘Study in India’ and aims to create world class institution. To this end, it has allocated an
• With these measures, the government is preparing the youth to enhance their skills amount of | 400 crore that has been provided for FY20, more than three times the revised estimates for
in language training, artificial intelligence (AI), internet of things, big data, 3D the previous year. There has been continuous focus on improving digital skills.
printing, virtual reality and robotics. These skills are esteemed highly in India &
overseas. Moreover, it also fetches higher remuneration
450
• Moreover, it is also encouraging start-ups by giving them an extended period of tax 400 700 Higher focus on digital skills
400 579
rebates, reduced labour laws (from 44 to four) and financial assistance. In this 600 517 511.3
350 3x increase in
Budget, the government also proposed a TV programme for start-ups, which would 300 allocation 500

| crore
work as a platform to discuss growth related issues, finding a venture capitalist, fund 250 400 336

| crore
200 304
raising and tax planning related issues. These channels would be designed and 129 300
150
executed by start-ups themselves 100 200
50 100
0
Budget allocation towards jobs and skill development has seen more than 2.5x 2018-19 2019-20 0
increase in last 2 years 2015-16 2016-17 2017-18 2018-19 2019-20
World Class Education (in | crore)
Total Digital e-learning (in | crore)

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These measures of the government will help reduce Indian students going to foreign universities, save
8000 foreign exchange and improve skills. This will have an indirect benefit in terms of higher patent filing.
7260
6830
7000 More than 2.5x increase
in Budget allocation
6000 towards job & skill Education related forex expenses (in US$ million)
14000 13000
development in last two 2776
5000 3000 2643 12000
years 2467
2500
| crore

10000 3x rise in patents

1931 1980
4000 2000 8000
1632
3000 2723 1500 6000
4000
4000
1000 557
1817 409 442 519 504 479 2000
2000 500
1177 0
0 Pre- 2014 Post-2014
1000
FY13 FY14 FY15 FY16 FY17 FY18
Number of petents
0 Inflow Outflow
2015-16 2016-17 2017-18 2018-19 2019-20

Source: RBI, Budget documents, PIB, ICICI Direct Research

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 6

Multifold measures to unveil novel source of infrastructure financing

The government has decided to start raising a part of its gross borrowing programme in external markets in external currencies. It is likely to improve the demand-supply
dynamics in the government securities market. Government borrowing for FY2019-20 is pegged at | 7.1 lakh crore. At 10-15%, as indicated by the Finance Secretary, inflows
through foreign bonds may be at | 70000 crore to | 1 lakh crore. With lower cost of funds, interest cost saving of ~| 4000 crore can be seen.

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The government has proposed to include shareholding of government controlled companies like LIC in calculation of 51% government stake. This move has the potential to
raise money to the extent of ~ | 289000 crore in listed PSU companies, which can be utilised for financing of the massive infrastructure investment outlays

Government to issue sovereign bonds overseas (| crore) Fund raising potential from government PSU stake sale

350000
710000 (government borrowing) 154000 289000
300000
250000
70000-100000 200000

| Crore
(proposed foreign 99900
150000
bonds)
100000
35700
50000
0
Interest savings Lower bond yields Govt holding at 65% Govt holding at 51% Govt and controlled Total potential stake

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PSUs holding at 51% sale

Companies with promoter shareholding >65% to release ~| 2 lakh crore of funds

Company Name Promoter stake % Stake to be sold (| crore)
With the government proposing to raise public shareholding threshold from 25% to
35% in listed companies, the potential amount that can be raised from private
TCS 72 59326
companies could be as high as | 2 lakh crore. While the move is aimed at wider
Wipro 74 15159 public participation in equities, the overall supply may have a near term overhang.
Hind. Unilever 67 8497 We expect Sebi to implement in a phased manner.
Interglobe Aviat 75 6254
Siemens 75 4836 Shareholding reduction to release | 2 lakh of additional funds
SBI Life Insuran 70 3635  Release of locked promoter wealth and flow of funds to startups/bond
ABB 75 3503 markets/deposits, etc.
DLF 72 3327  10% LTCG on stocks sold to flow to the exchequer
Berger Paints 75 3105  Equity supply in these companies seen rising creating short-term overhang in
Pidilite Inds. 70 2962 stock prices. However, FII buying can lead to forex inflows
L & T Infotech 75 2814

Source:: RBI, Budget Document, ICICI Direct Research,

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 7

Other key highlights

• Due to a slew of measures taken by government , the direct tax revenue has increased 78.2%, from | 6.38 lakh crore in FY14 to | 11.37 crore in FY19. It is

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growing at a double digit rate every year
• The government has announced its intention to invest | 100 lakh crore in infrastructure over the next five years
• Railway infrastructure requirement is estimated at | 50 lakh crore in 2018-30. Current annual spend hovers around | 1.5-1.6 lakh crore. Therefore, the
government proposes to use public-private partnership model for faster development and completion of tracks, rolling stock manufacturing and delivery of
passenger freight services
• Currently, the lower rate of 25% is only applicable to companies having annual turnover up to | 250 crore. The government proposes to widen this to include
all companies having annual turnover up to | 400 crore. This will cover 99.3% of companies
• Proposed levy of tax deduction at source (TDS) at the rate of 2% on cash withdrawal by a person in excess of | 1 crore in a year from a bank account
• Proposed to enhance surcharge on individuals having taxable income from | 2 crore to | 5 crore and | 5 crore and above so that effective tax rates for these
two categories will increase around 3% and 7%, respectively

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• In order to discourage the practice of avoiding dividend distribution tax (DDT) through buy back of shares by listed companies, the government proposes to
provide that listed companies shall also be liable to pay additional tax at 20% in case of buy back of share, as is the case currently for unlisted companies
• The government is setting an enhanced target of | 105000 crore of disinvestment receipts for the financial year 2019-20. It will undertake strategic sale of
PSUs. The government will also continue to consolidate PSUs in the non-financial space as well
• Proposed to give relief in levy of securities transaction tax (STT) by restricting it only to the difference between settlement and strike price in case of exercise
of options
• Proposed that one woman in every self help group (SHG) will be made eligible for a loan up to | 1 lakh under the MUDRA Scheme. Furthermore, for every
verified women SHG member having a Jan Dhan Bank Account, an overdraft of | 5000 shall be allowed
• For ease of access to credit for MSMEs, the government has introduced providing of loans up to 1 crore for MSMEs within 59 minutes through a dedicated
online portal. Under the Interest Subvention Scheme for MSMEs, | 350 crore has been allocated for FY20 for 2% interest subvention for all GST registered
MSMEs, on fresh or incremental loans

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 8

Other key highlights

• Regulation of HFCs has been moved from NHB to RBI

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• Propose to consider issuing Aadhaar card for Non-Resident Indians with Indian Passports after their arrival in India without waiting for 180 days
• To resolve the ‘angel tax’ issue the start-ups and their investors who file requisite declarations and provide information in their returns will not be subjected to
any kind of scrutiny in respect of valuations of share premiums
• Propose that business establishments with annual turnover more than | 50 crore shall offer such low cost digital modes of payment to their customers and no
charges or merchant discount rate shall be imposed on customers as well as merchants
• A public sector enterprise viz. New Space India (NSIL) has been incorporated as a new commercial arm of Department of Space to tap the benefits of the
research & development (R&D) carried out by Isro
• The government is developing 17 iconic tourism sites into world class tourist destinations and to serve as a model for other tourism sites
• Government plans to promote more ‘Zero Budget farming’. In turn, this reduces consumption of chemical fertiliser and agro chemicals while increasing the
usage of organic manures

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• It is proposed to make PAN and Aadhaar interchangeable and allow those who do not have PAN to file Income tax returns by quoting their Aadhaar number
• To facilitate on-shoring of international insurance transactions and enable opening of branches by foreign reinsurers in the International Financial Services
Centre, the government proposes to reduce net owned fund requirement from | 5000 crore to | 1000 crore

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 9

 Sectoral Impact

Measures Sectors Impacted Impact Key stocks

Proposal to raise minimum public shareholding threshold from 25% to 35% Across sectors Case specific IT, pharma, MNC, PSU among others

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Deduction for interest payment on electric vehicle (EV) purchase up to | 1.5 lakh per annum for loan taken till
FY23. Further, the government has proposed to the GST Council to reduce GST rate on EV from 12% to 5% and Auto OEMs Positive M&M, Hero MotoCorp
lowered customs duty on certain EV components
Government's thrust on increasing EV penetration in India and increasing exise on conventional fuels like petrol &
Auto OEMs Negative Maruti Suzuki, Bajaj Auto
diesel thereby discouraging the use of internal cumbustion engine vehicles
Domestic auto
Hike in basic customs duty on some auto components including mirrors, locks, catalytic covertors, air filters, etc Positive Motherson Sumi
ancillaries
Increase in allocation towards Pradhan Mantri Gram Sadak Yojana to | 19,000 crore, up 22% YoY Commercial Vehicle Positive Ashok Leyland, Tata Motors

Increase in custom duty on certain types of synthetic rubber, which forms <10% of RM costs for tyre players Tyres Negative Apollo Tyres, Jk Tyres

Fertiliser subsidies increased from | 70,125 crore to | 80035 crore of which urea subsidy increased by | 8629
Fertilizer Positive Fertiliser stocks
crore to | 53629 crore and nutrient based subsidiy to | 26367 crore from | 25090 crore
Micro Irrigation
Increase in the outlay for micro irrigation fund to | 3500 crore from | 4000 crore Negative EPC Industrie
System

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Funds allocated to PM Kisan scheme to the tune of | 75000 crore Agri input Positive Fertiliser and agro chemical stocks
PSB recapitalisation proposed at | 70,000 crore Public sector banks Positive BoI, Allahabad Bank, Canara Bank, etc

Housing Finance
Additional | 1.5 lakh deduction on interest paid for affordable housing loans till March 2020 Positive HDFC Ltd, Repco Home Finance, Gruh Finance, SBI etc
Companies and Banks

Government to provide one time credit guarantee for first time loss of 10% for bonds of sound NBFCs for total
NBFC Positive HDFC Ltd, Bajaj Finance, M&M Finance, L&T Finance
issuance up to | 1 lakh crore
Housing Finance
Regulation of HFCs moved from NHB to RBI Negative PNB HF, Canfin HF etc
Companies
Proposing recognition of interest on bad or doubtful debts in case of deposit-taking NBFC and systemically Manappuram Finance, Muthoot Finance, L&T Finance,
NBFC Positive
important non deposit-taking NBFC shall be charged to tax on receipt basis M&M Finance etc
DPSUs and Private
Defence capital outlay increased 8.7% YoY to | 108,248 crore (up from | 99,563 crore) Positive Bharat Electronics, L&T, Cochin Shipyard
defence companies
Targeted increase in manufacture of electric locomotives, coaches and wagons to 725, 7690 and 15000 units,
Bearings, Railway
respectively, thereby translating to an increase of 26.5%, 49.0% and 25% YoY, respectively. Overall, investment
manufacturing Positive Timken India, SKF India, Hind Rectifiers, Titagarh wagons
allocation for rolling stock has been increased 15.5% to | 34,514 crore. In addition, allocation for metro projects
companies
has increased 24.2% YoY to | 17,714 crore

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 10

 Sectoral Impact

MOMENTUM PICK
Measures Sectors Impacted Impact Key stocks
Allocation for grid interactive renewable power including green energy corridor, has been hiked by 14% YoY to | Power transmission,
Positive Kalpataru Power
4272 crore. This could result in higher tendering opportunities for solar PV, green energy corridor projects Capital goods
Budgetary allocation for railway electrification projects has been increased 10.5% YoY to | 6960 crore. This could
Capital goods Positive KEC, Kalpataru power
benefit players catering to railway electrification
‘Nal se Jal’ (water from tap) mission to provide tap water to 14 crore household by 2024. Capital allocation under
Plastic piping industry Positive Astral Poly, Supreme Industries
national rural drinking water mission has been doubled to | 10000 crore
Excise duty on cigarettes has been increased by a miniscule | 5 per thousand cigarettes, which will increase the
indirect tax outgo marginally. However, levying excise duty on cigarettes has opened new avenues for the FMCG Neutral ITC, VST Industries
government for increasing tax on cigarettes in future
Under Pradhan Mantri Gram Sadak Yojana (PMGSY) Phase-III, 1,25,000 km road length is envisaged to be
upgraded at an estimated cost of | 80,250 crore. This will present a host of opportunities for road based EPC Roads Positive NBCC, PNC Infratech
players, going ahead
The government has proposed to increase special additional excise duty and road & infrastructure cess each by

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| 1 per litre on petrol and diesel. Levy of | 1 per litre road and infrastructure cess could result in annualised Roads Positive PNC Infratech, Ashoka Buildcon, KNR Construction
collections worth | 14,500 crore, which should be further utilised towards development of roads
Container Train
Thrust to dedicated freight corridor Positive Container corporation of India, Gateway Distriparks
Operators
The government envisions to develop inland waterway for cargo transportation. As part of the Jal Marg Vikas
Project for enhancing navigational capacity of Ganga, a multimodal terminal at Varanasi has become functional in
Dredging Positive Dredging Corporation of India
November 2018 and two more such terminals at Sahibganj and Haldia and navigational lock at Farakka would be
completed in 2019-20
Increase in special additional excise duty and road & infrastructure cess by | 1/litre each on petrol and diesel.
Oil Marketing
Although petrol and diesel are deregulated, increase in taxes by | 2 per litre will impact marketing margins in the Negative HPCL, BPCL, IOC
Companies
near term and in case of higher oil prices
GAIL, GSPL, Indraprastha Gas, Mahanagar Gas, Gujarat
Government intends to develop a blueprint for developing gas grids Gas utility companies Positive
Gas, Petronet LNG
Government will address low utilisation of gas power plants. This will increase demand for domestic natural gas
Gas utility companies Positive GAIL, GSPL, Petronet LNG
as well as low cost LNG

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 11

 Sectoral Impact

Measures Sectors Impacted Impact Key stocks

The government has proposed additional deduction of up to | 1,50,000 lakh (total | 3,50,000 lakh) for interest
Marginally Mahindra Lifespace, Sobha, Sunteck and Brigade

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paid on loans borrowed up to March 31, 2020 for purchase of an affordable house valued up to | 45 lakh. This Real Estate
Positive Enterprises
move will boost demand for affordable housing and will be positive for leading real estate players
Hiked customs duty on imported gold from existing 10% to 12.5%. Gold prices are already prevailing near all-time
highs. An increase in customs duty would increase the price of gold jewellery for the customer, which can Gems & Jewellery Negative Titan
negatively impact volume growth for jewellery sector
The government has proposed to relax local sourcing norms for FDI in single branded retail to attract more FDI in
the sector. Given the huge opportunity in the organised retail space, there is enough room for all players to grow
Retail sector Neutral ABFRL, Trent, Shoppers Stop, Bata
on a sustainable business. On the operational front, adoption of global best practices would enhance the
efficiency of players
To promote digital transactions, the government has proposed that no charges or merchant discount rate (MDR)
Retail sector Positive ABFRL, Trent, Shoppers Stop, Bata
shall be imposed on customers as well as on merchants as RBI and banks will absorb these costs
Customs duty on optical fibres, optical fibre bundles and cables increased from 10% to 15% OF/OFC Players Positive Sterlite Technologies
Customs duty for water blocking tapes for manufacture of optical fiber cables increased from nil to 20% OF/OFC Players Neutral Sterlite Technologies
Customs duty for certain raw materials used for manufacture of preform of silica from their respective applicable

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OF/OFC Players Positive Sterlite Technologies
rates to nil
Print media
Customs duty on newsprint increased from nil to 10% Negative DB Corp, Jagran Prakashan
companies
Government will examine suggestions on further opening up of FDI in media (GEC could be one of the favoured
Media Neutral
segments)
Customs duty on wool fibre and wool tops reduced from 5% to 2.5%. Since indigenous production of fine quality
Woolen players Positive Monte Carlo Fashions
of wool is very limited, India depends almost exclusively on imports
Allocation for Amended Technology Upgradation Fund Scheme (ATUFS) increased from | 623 crore in 2018-19 to
Textile Players Neutral Vardhman Textiles, KPR Mills
| 700 crore in 2019-20
Government intends to promote aircraft financing and leasing from Indian Shores. Additionally,it would provide
support for enabling and the growth of Maintenance, Repair and Overhaul industry which is vital for the aviation Aviation Industry Positive Interglobe Aviation, Spicejet
industry
Under Pradhan Mantri Gram Sadak Yojana (PMGSY) Phase-III, 1,25,000 km road length is envisaged to be
Cement Industry Positive All cement majors
upgraded at an estimated cost of | 80,250 crore.This is expected to enhance the cement demand going ahead

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 12

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Pankaj Pandey Head – Research pankaj.pandey@icicisecurities.com

ICICI Securities – Retail Equity Research

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

research@icicidirect.com

July 5, 2019 ICICI Securities Ltd. | Retail Equity Research 13

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