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Consumer
We expect abatement on excise duty to be reduced, and a 5% hike in
excise duty on cigarettes. A roadmap for the GST is also expected to
be announced. A lower abatement rate would result in lower
EBITDA margins. Measures to curb food prices and greater
allocation for rural employment schemes would drive consumption.
Budget announcements
We expect excise duty to be increased by 100-200bps or abatement rates to
be reduced. An increase in abatement rates would maintain excise duty at
10%, the proposed rate for the General Sales Tax (GST). We also expect
excise duty on cigarettes to go up, by 5%.
Considering the high prices of food, we expect some Budgetary measures
to control them. With excess rainfall last year, we expect the government to
raise allocations for rural employment schemes. We also expect a roadmap
to GST implementation.
Impact on the sector
We do not expect any major impact on the consumer sector. Lower
abatement rates may hit margins of some consumer companies. Efforts to
reduce prices of food would drive demand for consumer products and
margins for food companies. Higher allocations for rural employment
schemes would drive rural consumption. A roadmap to GST would help
consumer companies adjust distribution networks and technology
platforms accordingly.
Impact on companies
We expect companies focusing on rural consumers to benefit. Greater
allocations for rural employment schemes would help drive consumption
as well as up-trading. We expect Nestle India and GSK Consumer, which
have introduced small SKUs, to further penetrate rural India. We expect as
GSK Consumer, Nestle India and Britannia to benefit from efforts to
bring down prices of food. ITC is expected to pass on a 5% increase in
excise duty through price hikes. It has already twice raised prices, in Dec’10
and Jan’11. Excise hike of more than 5% on cigarettes may impact ITC’s
volume growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Consumer
We expect abatement on excise duty to be reduced, and a 5% hike in
excise duty on cigarettes. A roadmap for the GST is also expected to
be announced. A lower abatement rate would result in lower
EBITDA margins. Measures to curb food prices and greater
allocation for rural employment schemes would drive consumption.
Budget announcements
We expect excise duty to be increased by 100-200bps or abatement rates to
be reduced. An increase in abatement rates would maintain excise duty at
10%, the proposed rate for the General Sales Tax (GST). We also expect
excise duty on cigarettes to go up, by 5%.
Considering the high prices of food, we expect some Budgetary measures
to control them. With excess rainfall last year, we expect the government to
raise allocations for rural employment schemes. We also expect a roadmap
to GST implementation.
Impact on the sector
We do not expect any major impact on the consumer sector. Lower
abatement rates may hit margins of some consumer companies. Efforts to
reduce prices of food would drive demand for consumer products and
margins for food companies. Higher allocations for rural employment
schemes would drive rural consumption. A roadmap to GST would help
consumer companies adjust distribution networks and technology
platforms accordingly.
Impact on companies
We expect companies focusing on rural consumers to benefit. Greater
allocations for rural employment schemes would help drive consumption
as well as up-trading. We expect Nestle India and GSK Consumer, which
have introduced small SKUs, to further penetrate rural India. We expect as
GSK Consumer, Nestle India and Britannia to benefit from efforts to
bring down prices of food. ITC is expected to pass on a 5% increase in
excise duty through price hikes. It has already twice raised prices, in Dec’10
and Jan’11. Excise hike of more than 5% on cigarettes may impact ITC’s
volume growth.
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