Zen_An Overview on Union Budget 2014-15

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Macro Economy

� For Current year, GDP projected at 5.4-5.9% with growth likely to be in the lower side of projection.

� Fiscal Deficit to be 4.1% for 2014-15, target of 3.6% for 2015-16 and 3% for 2016-17.

Budget Numbers at a Glance (Rupee Inflow & Outflow)

� Total expenditure of Rs.17,94,892 crore estimated. Of this Non-plan expenditure for the year has been estimatedat Rs 12.2 lakh crore and plan expenditure is at Rs 5.75 Lakh crore. Plan expenditure will increase by 26.9% overactuals of 2013-14.

� Budget is aiming for a 19.7 percent growth in tax collections in FY15, compared to a 21 percent growth projectedin the interim Budget present in February.

� Non-plan expenditure for the year has been estimated at Rs 12.2 lakh crore and plan expenditure at Rs 17.9 lakhcrore, both very much in line with the estimates in the interim Budget.

� To meet this expenditure, Gross Tax receipts of Rs. 13,64,524 crore estimated. Share of centre will be Rs 9,77,258crore. Non Tax Revenues for the current Financial Year will be Rs 2,12,505 crore and capital receipts other thanborrowings will be Rs.73,952 crore.

� Divestment goal of Rs 43,425 crore.

� New Statement to separately show plan allocation made for North Eastern Region. Allocation of Rs. 53,706 crorefor North East Regions. Allocation of Rs. 50,548 crore under SCSP and Rs. 32,387 under TSP. Allocation forwomen at Rs. 98,030 crore and for children at Rs. 81,075 crore.

Union Budget 2014-15

Key Takeaways from the Budget

Mea

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� Sovereign right of the Government to undertake retrospective legislation to be exercised with extremecaution and judiciousness keeping in mind the impact of each such measure on the economy and the overallinvestment climate.

� A stable and predictable taxation regime which will be investor friendly and spur growth.� Measures for strengthening the Authority for Advance Rulings.� Income-tax Settlement Commission scope to be enlarged.� The subsidy regime to be made more targeted for full protection to the marginalized, poor and SC/ST.� New Urea Policy would be formulated.� Introduction of GST to be given thrust.� High level committee to interact with trade and industry on regular basis to ascertain areas requiring clarity

in tax laws is required to be set up.� Setting up of Expenditure Management Commission to look into expenditure reforms.� Convergence with International Financial Reporting Standard (IFRS) by Adoption of the new Indian

Accounting Standards (2nd AS) by Indian Companies.� Employment exchanges to be transformed into career centres. A sum of Rs. 100 crore provided.� Manufacturing units to be allowed to sell its products through retail including E-commerce platforms.� Rs. 1000 crore provided for “Pradhan Mantri Krishi Sinchayee Yojna” for assured irrigation.� Fund of Funds with a corpus of Rs.10,000 crore for providing equity through venture capital funds, quasi

equity, soft loans and other risk capital specially to encourage new startups by youth to be set up.

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Basic Tax exemption limit raised to Rs. 2.5 lakh from the current Rs. 2lakh and Rs. 3 lakh for Senior citizen.No change in the rate of surcharge either for the corporates or theindividuals, HUFs, firms etc.

Direct Taxes Impact

Could result in increase in spending.

Specific rates of excise duty increased on cigarettes in the range of 11-72%

Basic customs duty on LCD and LED TV panels of below 19 inchesreduced from 10 percent to Nil. Colour picture tubes exempted frombasic customs duty.

Concessional basic customs duty of 5 percent on machinery andequipment required for setting up of compressed biogas plants (Bio-CNG).

Pre-forms of precious and semi-precious stones exempted from basiccustoms duty.

Excise duty increased from 12 percent to 16 percent on pan masala,from 50% to 55% on unmanufactured tobacco and from 60% to 70%on gutkha and chewing tobacco.

Imposition of basic customs duty on certain items falling outside thepurview of IT Agreement, exemption from SAD on inputs componentsfor PC manufacturing, imposition of education cess on importedelectronic products for parity etc.

Duty free entitlement for import of trimmings, embellishments andother specified items increased from 3 percent to 5 percent of the valueof their export, for readymade garments.

Withdraw concessional excise duty (2 percent without Cenvat benefitand 6 percent with Cenvat benefit) on smart cards and a uniform exciseduty at 12 percent.

Exemption to PSF and PFY manufactured from plastic waste and scrapincluding PET bottles from excise duty with effect from 29th June,2010 to 7th May, 2012.

Prospective levy of a nominal duty of 2 percent without Cenvat benefitand 6 percent with Cenvat benefit on such PSF and PFY.

Technical testing of newly developed drugs on human participantsbrought under service tax.

In Direct Taxes Impact

Negative for ITC, VST Inds, Godfrey Philips

Positive for Consumer Durables

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PC Jewellers, TBZ

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HCL Infosystems

Arvind, Kitex Garments, Gokaldas Exports,Pearl Global Inds.

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Broader Taxation Issues (Corporate & Personal)

Limit under Sec80C raised to Rs. 1.5 lakh from the current Rs. 1 lakh. Can mean more investments into financialinstruments.

EMI exemption for self occupied property raised to Rs. 2 lakh.Income arising to foreign portfolio investors from transaction insecurities to be treated as capital gains.

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Investment allowance at the rate of 15% to a manufacturing companythat invests more than Rs. 25 crore in any year in new plant andmachinery. The benefit to be available for three years i.e. forinvestments upto 31st March 2017.

Promotes greenfield expansions.

Income and dividend distribution tax to be levied on gross amountinstead of amount paid net of taxes.

Increases dividend distribution cost forcompanies by another 264 bps.

Conducive tax regime to Infrastructure Investment Trusts and RealEstate Investment Trusts to be set up in accordance with regulationsof the Securities and Exchange Board of India.

Positive for Infra and Realty Companies.

10 year tax holiday extended to the undertakings which begingeneration, distribution and transmission of Power by 31st March 2017

All the new capex which start power generationby 31st March 2017 will get this benefit.

Government to review the DTC in its present shape and take a view inthe whole matter.

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No change to the current retrospective taxation policy. However, allretro tax cases arising out of the 2012 amendment of I-T Act will bescrutinised by a high level CBDT committee.

Negative for Foreign Investors.

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Ongoing process of consultations with all the stakeholders onthe enactment of the Indian Financial Code and reports of theFinancial Sector Legislative Reforms Commission (FSLRC) tobe completed.

Proposal

Capital Markets

Impact Companies Impacted

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Government in close consultation with the RBI to put in place amodern monetary policy framework. - -

Following measures will be taken to energize Capital markets:Introduction of uniform KYC norms and inter-usability of theKYC records across the entire financial sector.Introduce one single operating demat account.Uniform tax treatment for pension fund and mutual fund linkedretirement plan.The eligible date of borrowing in foreign currency extendedfrom 30.06.2015 to 30.06.2017 for a concessional tax rate of 5percent on interest payments. Tax incentive extended to all typesof bonds instead of only infrastructure bonds.

Secures the keyinterests of investors incapital markets.

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Excise duty is increased on cigarettes in the range of 11% to72%

Proposal

FMCG Sectoral Impact : Neutral


Negative for TobaccoCompanies and couldresult in volume pressure

ITC, Godfrey Phillip,VST

Excise duty is increased from 12% to 16% on pan masala, from50% to 55% on unmanufactured tobacco and from 60%to 70%on gutkha and chewing tobacco.

- -

The basic customs duty on fatty acids, crude palm stearin, RBDand other palm stearin, specified industrial grade crude oilshas been reduced from 7.5% to Nil.The basic customs duty on crude glycerin from 12.5% to 7.5%and crude glycerin used in the manufacture of soaps from 12.5%to Nil.

Positive for all companiesthat manufacture soaps

HUL, GCPL, JyothyLabs, ITC

Levy of an additional duty of excise at 5% on aerated waterscontaining added sugar.

- -

Central Government Departments and Ministries to integratetheir services with the e-Biz - a single window IT platform- forservices on priority by 31st December this year

Proposal

IT / Telecom Sectoral Impact : Neutral


- CMC

IT- TrainingPan India programme “Digital India” to with an outlay of Rs.500 crore to be launched.

- NIIT, Aptech

FM proposes 10% customs duty on some telecom products - -

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To consider consolidation of PSU banks and examine proposalto give more autonomy to banks.

Will sell bank shares to retail investors with majority be heldby the government.

PSU banks will need Rs. 2.4 lakh crore govt infusion by 2018 tomeet basel III requirements.

PSUs will invest through capital investment a total sum of Rs.2,47,941 crores in the current financial year.

Proposal

BFSI


Good for PSU banks All PSU Banks

Six Bank recovery tribunals set up. This will help banks toimprove their bad loansituation

Specially beneficial toPSU banks

Banks will be allowed to raise long term loans to provide lendingto infrastructure sector with minimum regulatory pre-emptionsuch as CRR, SLR and Priority Sector Lending (PSL).

IDFC

Allow banks to raise long term funds with minimumregulations.The govt is aiming for Rs. 8 lakh crore credit for farm sector.proposes additional 3% interest subsidy on farm loans.

Will put additionalburden on banks All PSU banks

Extended additional tax incentive on home loans shall be providedto encourage people, especially the young, to own houses.

Banks and Housingfinance companies

A sum of Rs. 4000 crores for NHB from the priority sector lendingshortfall with a view to increase the flow of cheaper credit foraffordable housing to the urban poor/EWS/LIG segment isprovided.

Ashiana,DewanHousing, Canfin Homes,GIC Housing finance,Repco, Gruh Finance

Boost to affordablehousing segment

Insurance

The pending Insurance (amendment) Bill to be brought to theconsideration of the Parliament immediately.

The composite cap in the insurance sector to be increased up to49%from 26% with full Indian management and control throughthe FIPB route.

ABNuvo, Bajaj Finserv,Exide Inds, Max India

Positive for insurancecompanies

MFsTax breaks for capital gains for debt funds will happen only ifheld for three years.

Tax rate on long term capital gains on sale of debt mutual fundincreased to 20% from 10%.

Impact all debt funds

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Capital outlay for Defence increased by Rs. 5000 crore includinga sum of Rs. 1000 crore for accelerating the development of theRailway system in the border areas.

Proposal

Capital Goods Sectoral Impact : Marginal Positive


-Texmaco rail, TitagarhWagons

As part of military modernisation drive, Government allocatedRs 2.29 lakh crore for the Defence Ministry in the Budget,marking an increase of around 12.5% from the last fiscal as itraised the FDI limit in the defence sector up to 49% from 26%now.

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BEL, BEML, M&M,Tata Motors, AshokLeyland, PipavavDefence, AstraMicrowave,Walchandnagar Ind.,Centum Electronics...

Rs.100 crore provided to set up a Technology DevelopmentFund for Defence. Rs.2250 crore provided to strengthen andmodernize border infrastructure.

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Sectoral Impact : Marginal Positive

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Proposal

Metals & Mining Sectoral Impact : Neutral


- Gujarat NRE Coke,

Tata Steel, JSW Steel,SAIL

- -

Basic customs duty on metallurgical coke increased from Nilto 2.5% in line with the duty on coking coal. - -

Export duty on bauxite increased from 10% to 20%. will benefit localaluminium units asbauxite is the key rawmaterial for aluminium

Sesa Sterlite

Comprehensive measures for enhancing domestic coalproduction are being put in place. - Coal India

Changes, if necessary, in the MMDR Act, 1957 to be introducedto encourage

Investment in mining sector and promote sustainable mining practices.

- -

Proposal

Power Sectoral Impact : Positive


10 year tax holiday extended to the undertakings which begingeneration, distribution and transmission of power by 31thMarch 2017.

All the new capex whichstart power generation by31st march 2017 will getthis benefit.

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Adequate quantity of coal will be provided to power plantswhich are already commissioned or would be commissionedby March 2015.An exercise to rationalize coal linkages to optimize transport ofcoal and reduce cost of power is underway.

Positive for companiesthat produce coal basedPower.

NTPC, Tata Power,RPower, JP Power

Concessional basic customs duty of 5 percent extended tomachinery and equipment required for setting up of a projectfor solar energy production.

- Swelect Energy Systems.

Rs. 500 crores provided for Ultra Mega Solar Power Projects inRajasthan, Gujarat, Tamil Nadu, Andhra Pradesh and Ladakh.

Positive for companiesoperating Solar powerprojects

Tata Power, RPower

Rs. 100 crore is allocated for a new scheme “Ultra-Modern SuperCritical Coal Based Thermal Power Technology.” - NTPC, Reliance Power,

Tata Power, JSPL.

Rs. 400 crores provided for a scheme for solar power drivenagricultural pump sets and water pumping stations. - -

Anthracite coal, bituminous coal, coking coal, steam coal andother coal to attract 2.5% basic customs duty and 2% CVD toeliminate all assessment disputes and transaction costsassociated with testing of various parameters of coal.

Basic customs duty on imported flat-rolled products of stainlesssteel from 5% to 7.5%.

Production and exploitation of Coal Bed Methane reserves willbe accelerated.Possibility of using modern technology to revive old or closedwells to be explored

Proposal

Oil & Gas Sectoral Impact : Neutral


Will benefit explorationcompanies ONGC, RIL

Proposal to develop pipelines using appropriate PPP models.In order to complete the gas grid across the country, anadditional 15,000 km of pipelines are proposed.

- GAIL, Indraprastha Gas

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New Urea Policy would be formulated.

New policy changewould revive Urea pricesand reduce subsidyburden for govt.

NFL, RCF, ChambalFert, Tata Chemicals,GNFC, GSFC, DeepakFert, MCF..

Rs. 1000 crore provided for “Pradhan Mantri Krishi SinchayeeYojna” for assured irrigation.

Government to establish two more Agricultural ResearchInstitute of excellence in Assam and Jharkhand with an initialsum of Rs. 100 crore

An amount of Rs. 100 crores set aside for “Agri-techInfrastructure Fund”.

Rs. 200 crore provided to open Agriculture Universities inAndhra Pradesh and Rajasthan and Horticulture Universitiesin Telangana and Haryana.

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A sustainable growth of 4% in Agriculture will be achieved

Higher chances ofvolume growth in seeds,fertilizers and Agrochemical companies.

Positive for Seeds,Fertilizers and Agrichemicals business

More productive, asset creating and with linkages toagriculture and allied activities wage employment would tobe provided under MGNREGA.A scheme to provide every farmer a soil health card in a Missionmode will be launched. Rs.100 crore has been provided forthis purpose and additional Rs. 56 crores to set up 100 MobileSoil Testing Laboratories across the country.To meet the vagaries of climate change a “National AdaptationFund” with an initial sum an amount of Rs. 100 crore will beset up.To mitigate the risk of Price volatility in the agriculture produce,a sum of Rs.500 crore is provided for establishing a “PriceStabilization Fund”.Central Government to work closely with the StateGovernments to re-orient theirrespective APMC Acts.Government committed to provide wheat and rice atreasonable prices to the weaker sections of the society.Government when required will undertake open market salesto keep prices under control.Transformation plan to invigorate the warehousing sector andsignificantly improvepost-harvest lending to farmers.Sum of Rs. 50 crores provided for the development ofindigenous cattle breeds and an equal amount for starting ablue revolution in inland fisheries.

Provide impetus for thesector’s growth -

Proposal

Agri Sectoral Impact : Marginal Positive


Technology driven second green revolution with focus onhigher productivity and including “Protein revolution” will bearea of major focus.

Seeds companies, whichalso have hybrid seedscould result in highervolumes

Bayer Crop science,Kaveri seeds, Monsantoseeds.

Reduction in excise duty on specifiedfood processing andpackaging machinery from 10 percent to 6 percent.

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Rs.100 crore provided for Metro Projects in Lucknow andAhmedabad

Proposal

Infrastructure Sectoral Impact : Positive


Positive for companiesthat constructs Metro,supplies wagons..

L&T, GMR, BEML,BHEL

Allocation of Rs. 5,000 crore provided for the WarehouseInfrastructure Fund.

Could result in providingimproved warehousingfacilities.

Container Corporation,Gati

Rs. 100 crore provided for setting up a National IndustrialCorridor Authority.

Master planning of 3 new smart cities in the Chennai-BengaluruIndustrial Corridor region, viz., Ponneri in Tamil Nadu,Krishnapatnam in Andhra Pradesh and Tumkur in

Karnataka to be completed.

Master planning of 3 new smart cities in the Chennai-BengaluruIndustrial Corridor region, viz., Ponneri in Tamil Nadu,Krishnapatnam in Andhra Pradesh and Tumkur in Karnatakato be completed.

Development of industrial corridors with emphasis on SmartCities linked to transport connectivity to spur growth inmanufacturing and urbanization will be accelerated.

Could benefit Real estatecompanies and CapitalGoods companies

Positive for Realty andCapital Goods firms

An institution to provide support to mainstreaming PPPPscalled 4PIndia to be set up with a corpus of Rs. 500 crores.

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Roads sector:

An investment of an amount of Rs. 37,880 crores in NHAI andState Roads is proposed which includes Rs. 3000 crores for theNorth East.

Target of NH construction of 8500 km will be achieved in currentfinancial year.

Work on select expressways in parallel to the development ofthe Industrial Corridors will be initiated. For project preparationNHAI shall set aside a sum of Rs. 500 crore

Positive for Constructioncompanies especiallycompanies in Roadsconstruction

IL&FS Transport, IRBInfra, SadbhavEngineering, AshokaBuildcon, NCC andKNR Constructions.

A modified REITS type structure for infrastructure projects asthe Infrastructure Investment Trusts (INVITS).

To attract long termfinance from foreign anddomestic sourcesincluding NRIs .

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Requirement of the built up area and capital conditions for FDI tobe reduced from 50,000 square metres to 20,000 square metres andfrom USD 10 million to USD 5 million respectively for developmentof smart cities.Government to promote FDI selectively in sectors.The composite cap of foreign investment to be raised to 49 per centwith full Indian management and control through the FIPB route.

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Allocation for National Housing Bank increased to Rs. 8000crore to support Rural housing

Proposal

Construction & Real Estate Sectoral Impact : Positive


Will benefit companieswhich are into buildinglow cost housing

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Incentives for REITs and complete pass through status to avoiddouble taxation

To attract long term financefrom foreign and domesticsources including the NRIs.

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A sum of Rs. 4000 crores for NHB from the priority sectorlending shortfall with a view to increase the flow of cheapercredit for affordable housing to the urban poor/EWS/LIGsegment is provided

Boost to affordablehousing segment Ashiana Housing

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Service tax exempted on loading, unloading, storage,warehousing and transportation of cotton, whether ginned orbaled.

Proposal

Textiles Sectoral Impact : Marginal Positive


Boost to local textilemanufacturers -

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Duty free entitlement for import of trimmings, embellishmentsand other specified items increased from 3 percent to 5 percentof the value of their export, for readymade garments

Boost to the textile sector -A sum of Rs 500cr is allocated for developing a Textile megacluster at Varanasi and 6 more cities

Tax incidence to be reduced on transport of goods throughcoastal vessels to promote Indian Shipping industry.

To develop Inland waterways.

Proposal

Shipping and Logistics Sectoral Impact : Positive


Will promote the growthin the shipping sector

Shipping corporation ofIndia, Mercator lines

- Gujarat Pipavav Port,Adani PortsTo award 16 new port projects in FY15.

Will benefit ship breakingcompanies ABG Shipyard

Duty on ship breaking scrap and melting scrap of iron or steelrationalized by reducing the basic customs duty on shipsimported for breaking up from 5% to 2.5%.

- Shipping Corp,Container Corp.

Provision of services rules to be amended and tax incidence tobe reduced on transport of goods through coastal vessels topromote Indian Shipping industry.Service tax exempted on loading, unloading, storage,warehousing and transportation of cotton, whether ginned orbaled.

- -Rs. 11,635 crore will be allocated for the development of OuterHarbour Project in Tuticorin for phase I.SEZs will be developed in Kandla and JNPT.

- -AirportsTo develop airports in Tier 1 and Tier II cities through PPP mode.

To allocate Rs 500cr for 5 tourist circuits

Proposal

Hotel and Tourism Sectoral Impact : Positive


Positive for companiesoperating in Travelling,Hotel and Resorts.

Thomas Cook, Cox &Kings, MHRIL, EIH,Indian Hotels

Services provided by Indian tour operators to foreign touristsin relation to a tour wholly conducted outside India to be takenout of the tax net and Cenvat credit for services of rent-a-caband tour operators to be allowed to promote tourism.

Will benefit tourdomestic operators.

Thomas Cook, Cox &Kings

Facility of Electronic Travel Authorization (e-Visa) to beintroduced in phased manner at nine airports in India.

Positive for companiesoperating in Travel &Hotel segment.

Thomas Cook, Cox &Kings, Indian Hotel, EIHetc.

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For venture capital in the MSME sector, a Rs. 10,000 crore fundto act as a catalyst to attract private Capital by way of providingequity, quasi equity, soft loans and other risk capital for start-up companies with suitable tax incentives to participatingprivate funds to be established.

Proposal

Others


- IL&FS InvestmentManagers (IVC)

- All cement companiesFM proposes Rs 7,060 crore to develop 100 smart cities

Positive for sanitarycompanies

Cera Sanitary, HSIL“Swachh Bharat Abhiyan” to cover every household withsanitation facility by the year 2019.

- Bata , Relaxo, LibertyReduction in the excise duty from 12% to 6% on footwear ofretail price exceeding Rs.500 per pair but not exceeding Rs. 1,000per pair.

- Titan, GitanjaliJewellers, PC Jewellers.

Basic customs duty on semi processed, half cut or brokendiamonds, cut and polished diamonds, coloured gemstonesrationalised at 2.5%.

Positive for educationalcompanies that offer skilloriented courses

NIIT, AptechSkill India to be launched to skill the youth with an emphasison employability and entrepreneur skills

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Investment allowance at the rate of 15% to a manufacturingcompany that invests more than Rs. 25 crore in any year in newplant and machinery. The benefit to be available for three yearsi.e. for investments upto 31.03.2017.

- ITD Cementation

Rs. 100 crore provided for Detailed Project Reports for linkingof rivers.

Rs. 2037 crores provided for Integrated Ganga ConservationMission “NAMAMI GANGA”

Rs. 100 crore provided for Ghat development and beautificationat Kedarnath, Haridwar, Kanpur, Varanasi, Allahabad, Patnaand Delhi.

NRI Fund for Ganga will be set up.

- Tata Power andReliance Infra

Rs. 200 crore for power reforms and Rs. 500 crore for waterreforms to make Delhi a truly World Class City.Rs. 50 crore provided to solve the long term water supply issuesto the capital region.Construction of long pending Renuka Dam to be taken up onpriority.

- -Rs.100 crore allocated for 600 new and existing CommunityRadio Stations.

Source: Budget Speech

Sale of space or time for advertisements in broadcast media,extended to cover such sales on other segments like online andmobile advertising.

Sale of space for advertisements in print media however wouldremain excluded from service tax.

Proposal

Media & Entertainment Sectoral Impact : Neutral


HT Media

Jagran Prakashan.DB Corp.

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DISCLAIMERThis document was prepared by Zen Securities Ltd (ZSL), on the basis of publicly available information, internally developed data and othersources believed to be reliable. The material contained herein is for information only and under no circumstances should be deemed as an offer tosell or a solicitation to buy any security. ZSL or its employees, may, from time to time have positions in the stocks mentioned in this document. Whileall care has been taken to ensure that the facts are accurate and the opinions are reasonable, ZSL shall not be liable for any loss or damagehowsoever arising as a result of any person acting or refraining from acting in reliance on any information contained therein.

Documents

Zen_An Overview on Union Budget 2014-15