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India Equity Research Reports, IPO and Stock News
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CAPITAL GOODS & ENGINEERING
BUDGET HIGHLIGHTS & IMPACT
n Excise rate maintained at 10%
Impact: Neutral. The FM has maintained Excise duty at 10%. The capital goods
industry is reeling under cost pressures from commodities and a further excise
rate hike would have been negative. Thus status quo on excise should come
as a relief to the manufacturing sector.
n Central excise exemption on specified equipment used for preservation
of agriculture produce
Impact: Positive. To attract investment in cold-storage chain, capital investment
will be eligible for viability gap funding scheme of the Finance Ministry. It is
also proposed to recognize cold chains and post-harvest storage as an
infrastructure sub-sector. The FM has also extended full exemption from excise
duty on air-conditioning equipment and refrigeration panels used for cold
storage. We believe this move will be a positive for manufacturers of coldstorage
equipments like Blue Star and Voltas.
n Rural Broadband connectivity
Impact: Positive. A plan has been finalised to provide Rural Broadband
Connectivity to all 2,50,000 Panchayats in the country in three years. This is
a positive for Sterlite Technologies, which is the largest manufacturer of optical
fibres cables in the country.
n Defence capex raised by 13.8%
Impact: Positive. Capital expenditure on defense for 2011-12 has been raised
by 13.8% to Rs.692 bn. The increase in planned capex on defence is positive
for Bharat Electronics Ltd (BEL) as higher allocation should translate into increase
in order book.
n Excise duty exemption on brownfield expansion of ultra-mega power
project
Impact: Positive. Excise duty on Greenfield investment in ultra-mega power
project is eligible for customs as well as excise duty under the mega-power
policy. However, brownfield expansion of existing mega-power project has
to pay 2.5% customs duty (no CVD) in case of imported equipments and full
excise duty in case of domestic suppliers of main plant equipment. This creates
a disability for the domestic suppliers who are required to pay Central Excise
duty on supplies to such projects. To provide a level playing field to domestic
manufacturers (BHEL, L&T, BGR, JSW-Toshiba and Thermax), the FM has
proposed to exempt excise duty for ultra-mega power project brownfield
expansion. The benefit however is only symbolic as none of the ongoing ultramega
power projects have announced their brownfield expansion plans.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CAPITAL GOODS & ENGINEERING
BUDGET HIGHLIGHTS & IMPACT
n Excise rate maintained at 10%
Impact: Neutral. The FM has maintained Excise duty at 10%. The capital goods
industry is reeling under cost pressures from commodities and a further excise
rate hike would have been negative. Thus status quo on excise should come
as a relief to the manufacturing sector.
n Central excise exemption on specified equipment used for preservation
of agriculture produce
Impact: Positive. To attract investment in cold-storage chain, capital investment
will be eligible for viability gap funding scheme of the Finance Ministry. It is
also proposed to recognize cold chains and post-harvest storage as an
infrastructure sub-sector. The FM has also extended full exemption from excise
duty on air-conditioning equipment and refrigeration panels used for cold
storage. We believe this move will be a positive for manufacturers of coldstorage
equipments like Blue Star and Voltas.
n Rural Broadband connectivity
Impact: Positive. A plan has been finalised to provide Rural Broadband
Connectivity to all 2,50,000 Panchayats in the country in three years. This is
a positive for Sterlite Technologies, which is the largest manufacturer of optical
fibres cables in the country.
n Defence capex raised by 13.8%
Impact: Positive. Capital expenditure on defense for 2011-12 has been raised
by 13.8% to Rs.692 bn. The increase in planned capex on defence is positive
for Bharat Electronics Ltd (BEL) as higher allocation should translate into increase
in order book.
n Excise duty exemption on brownfield expansion of ultra-mega power
project
Impact: Positive. Excise duty on Greenfield investment in ultra-mega power
project is eligible for customs as well as excise duty under the mega-power
policy. However, brownfield expansion of existing mega-power project has
to pay 2.5% customs duty (no CVD) in case of imported equipments and full
excise duty in case of domestic suppliers of main plant equipment. This creates
a disability for the domestic suppliers who are required to pay Central Excise
duty on supplies to such projects. To provide a level playing field to domestic
manufacturers (BHEL, L&T, BGR, JSW-Toshiba and Thermax), the FM has
proposed to exempt excise duty for ultra-mega power project brownfield
expansion. The benefit however is only symbolic as none of the ongoing ultramega
power projects have announced their brownfield expansion plans.
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