Volatile stock markets ended 0.6 per cent lower on Monday, though rupee staged its best rally in three weeks on Budget announcements. Arun Jaitley's third Union Budget was focused on boosting investment in the farm and infrastructure sectors, but investors heaved a sigh of relief as the finance minister retained FY17 fiscal deficit target at 3.5 per cent of GDP.
The following sectors/companies will benefit or be hurt by the Budget proposals:
Winners:
1) Agriculture: Mr Jaitley said Rs 35,984 crore would be set aside for farmers' welfare for the year starting April 2016. The government will also launch aid schemes intended to help double farmers' incomes by 2022. Mr Jaitley also raised the agricultural credit target for FY17 to a record Rs 9 trillion, amid rising rural distress after a series of droughts in the country. Companies such as Jain Irrigation, Mahindra and Mahindra, Monstanto India that supply agricultural equipment and seeds are likely to benefit.
2) Infrastructure: Mr Jaitley plans to allocate Rs 55,000 crore for developing roads and highways. Capital expenditure on development of roads, highways and railways has been set at Rs 2.18 lakh crore for the year. The higher infrastructure spending bodes well for companies such as IRB Infrastructure Developers, L&T and Gammon Infrastructure Projects.
3) New manufacturing companies incorporated on or after March 1, 2016 will be given an option to be taxed at a reduced rate of 25 per cent plus surcharge and cess, provided they do not claim profit-linked or investment-linked deductions and do not use the investment allowance and accelerated depreciation.
4) Real Estate: Dividends from a special purpose vehicle to a Real Estate Investment Trust (REIT) and an Infrastructure Investment Trust (InvIT) will not be subjected to the Dividend Distribution Tax, Mr Jaitley said, resolving a major hurdle for listing of REITs. That would help companies, including DLF, Prestige Estates Projects, and Sobha, which have been waiting to list REITs. Mr Jaitley's plans to provide tax incentives for affordable housing are likely to benefit builders of low-cost homes, including Mahindra Lifespace Developers and Housing Development and Infrastructure.
5) Asset Reconstruction Companies: The government said it would allow so-called sponsors of asset reconstruction companies (ARCs), which buy bad loans from banks, to own 100 per cent of the company. Foreign investors can fully own Indian ARCs without having to seek prior approval from the government. The moves will help ARCs including Edelweiss ARC, JM Financial ARC and ARCIL raise more capital.
Losers:
6) Cars: The Budget proposed an infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, of 2.5 per cent on diesel cars of certain capacity, and of 4 per cent on other higher engine capacity vehicles and SUVs. The Budget also called for tax to be deducted at source at the rate of 1 per cent for purchases of luxury cars exceeding a price of Rs 10 lakh. India's largest automobile maker Maruti Suzuki and SUV-makers Mahindra and Mahindra and Tata Motors are likely to be hurt.
7) Retail and textile: Excise duty on readymade garments with a retail price of Rs 1,000 or more has been raised to 2 per cent without input tax credit, or 12.5 per cent with input tax credit. Apparel retailers such as Aditya Birla Nuvo, Future Retail, and Shopper's Stop along with textile manufacturers such as Arvind are likely to be hurt.
8) Tobacco: Excise duties on various tobacco products have been raised by about 10 per cent to 15 per cent. Cigarettte makers such as ITC and VST Industries are likely to be affected.
9) Oil explorers: Mr Jaitley in his Budget changed the so-called Oil Industries Development Cess on locally produced crude oil from Rs 4,500 per tonne to 20 per cent of the value of the commodity. Industry had however expected a much lower tax rate, traders said. This affects companies such as Oil and Natural Gas Corp, Cairn India and Oil India.
The following sectors/companies will benefit or be hurt by the Budget proposals:
Winners:
1) Agriculture: Mr Jaitley said Rs 35,984 crore would be set aside for farmers' welfare for the year starting April 2016. The government will also launch aid schemes intended to help double farmers' incomes by 2022. Mr Jaitley also raised the agricultural credit target for FY17 to a record Rs 9 trillion, amid rising rural distress after a series of droughts in the country. Companies such as Jain Irrigation, Mahindra and Mahindra, Monstanto India that supply agricultural equipment and seeds are likely to benefit.
2) Infrastructure: Mr Jaitley plans to allocate Rs 55,000 crore for developing roads and highways. Capital expenditure on development of roads, highways and railways has been set at Rs 2.18 lakh crore for the year. The higher infrastructure spending bodes well for companies such as IRB Infrastructure Developers, L&T and Gammon Infrastructure Projects.
3) New manufacturing companies incorporated on or after March 1, 2016 will be given an option to be taxed at a reduced rate of 25 per cent plus surcharge and cess, provided they do not claim profit-linked or investment-linked deductions and do not use the investment allowance and accelerated depreciation.
4) Real Estate: Dividends from a special purpose vehicle to a Real Estate Investment Trust (REIT) and an Infrastructure Investment Trust (InvIT) will not be subjected to the Dividend Distribution Tax, Mr Jaitley said, resolving a major hurdle for listing of REITs. That would help companies, including DLF, Prestige Estates Projects, and Sobha, which have been waiting to list REITs. Mr Jaitley's plans to provide tax incentives for affordable housing are likely to benefit builders of low-cost homes, including Mahindra Lifespace Developers and Housing Development and Infrastructure.
5) Asset Reconstruction Companies: The government said it would allow so-called sponsors of asset reconstruction companies (ARCs), which buy bad loans from banks, to own 100 per cent of the company. Foreign investors can fully own Indian ARCs without having to seek prior approval from the government. The moves will help ARCs including Edelweiss ARC, JM Financial ARC and ARCIL raise more capital.
Losers:
6) Cars: The Budget proposed an infrastructure cess of 1 per cent on small petrol, LPG, CNG cars, of 2.5 per cent on diesel cars of certain capacity, and of 4 per cent on other higher engine capacity vehicles and SUVs. The Budget also called for tax to be deducted at source at the rate of 1 per cent for purchases of luxury cars exceeding a price of Rs 10 lakh. India's largest automobile maker Maruti Suzuki and SUV-makers Mahindra and Mahindra and Tata Motors are likely to be hurt.
7) Retail and textile: Excise duty on readymade garments with a retail price of Rs 1,000 or more has been raised to 2 per cent without input tax credit, or 12.5 per cent with input tax credit. Apparel retailers such as Aditya Birla Nuvo, Future Retail, and Shopper's Stop along with textile manufacturers such as Arvind are likely to be hurt.
8) Tobacco: Excise duties on various tobacco products have been raised by about 10 per cent to 15 per cent. Cigarettte makers such as ITC and VST Industries are likely to be affected.
9) Oil explorers: Mr Jaitley in his Budget changed the so-called Oil Industries Development Cess on locally produced crude oil from Rs 4,500 per tonne to 20 per cent of the value of the commodity. Industry had however expected a much lower tax rate, traders said. This affects companies such as Oil and Natural Gas Corp, Cairn India and Oil India.
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