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India Equity Research Reports, IPO and Stock News
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CONSTRUCTION
BUDGET HIGHLIGHTS & IMPACT
n Allocation for infrastructure sector is 23.3% higher than FY11
Impact: Positive. Allocation of nearly Rs 2140 bn has been made towards
infrastructure sector which is 23.3% higher than FY11. It forms nearly 48.5%
of the Gross Budgetary Support to plan expenditure. We expect this amount
to be utilized for development of physical infrastructure such as roads, ports,
airports, railways to sustain high economic growth. This would translate into
higher order inflows for companies present in these segments such as IRB Infra,
IVRCL, NCC, Simplex Infra and Unity Infra.
n Increased allocations for road, irrigation, housing and drinking water
supply
Impact: Positive. Allocation for road, irrigation, housing and drinking water
supply has been increased by Rs 100 bn to Rs 580 bn for FY12. This would
be done through Bharat Nirman which includes Pradhan Mantri Gram Sadak
Yojna (PMGSY), Accelerated Irrigation Benefit Programme, Rajiv Gandhi Grameen
Vidyutikaran Yojna, Indira Awas Yojna, National Rural Drinking Water Programme
and Rural telephony. We expect it to be positive for IVRCL, NCC, Pratibha
Industries and Unity Infra
n Tax free bonds for infrastructure development
Impact: Positive. Government has allowed tax free bonds of Rs 300 bn to give
boost to infrastructure development in railways, ports, housing and highways
development. This includes Indian Railway Finance Corporation 100 bn, National
Highway Authority of India Rs 100 bn, HUDCO Rs 50 bn and Ports Rs 50 bn.
This is expected to ease funds with these organizations and hence award more
projects.
n Hike in FII limit for infrastructure sector corporate bonds
Impact: Positive. FII limit for investment in corporate bonds of infrastructure
companies has been hiked from $5 bn to $25bn. This is likely to enhance the
flow of funds to the infrastructure sector and FIIs would also be allowed to
invest in unlisted bonds of of infrastructure SPV's with a minimum lock in period
of three years. This would be positive for companies having SPVs that are looking
for raising funds such as IVRCL, NCC, Madhucon Projects, IRB Infra.
n Infrastructure debt fund
Impact: Positive. Setting up of dedicated infrastructure debt fund has been
proposed to augment low cost funds from abroad for the infrastructure sector.
Income from that fund would be exempt from tax. It is also proposed that
any income received by non-resident from that fund shall be taxable at the
rate of 5% only. This is expected to ease liquidity for the infrastructure sector.
n Service tax exemption on few services
Impact: Positive. Service tax exemption is extended to works contract service
provided for construction or finishing of new residential complex under
Jawaharlal Nehru National urban renewal mission or Rajiv Awaas Yojana.
Exemption is also being provided for services provided within a port or airport
under 'Works contract' service for specified services. This would be positive
for construction companies carrying out works contract in these segments such
as Unity Infra, Pratibha Industries, NCC etc.
n Increase in MAT from 18% to 18.5%; surcharge reduced from 7.5% to 5%
Impact: Neutral. MAT has been increased from 18% to 18.5% but
correspondingly surcharge has been reduced from 7.5% to 5% so overall impact
in tax rate is not much. We expect this to be neutral for companies that fall
under MAT regime.
n MAT on SEZ's
Impact: Negative. Sunset clause has now been proposed for availability of
exemption from MAT in case of SEZ developers and units in SEZs. Thus, with
effect from FY12, SEZ developers or units operating in SEZs will have to pay
MAT. Along with this, exemption of dividend distribution tax is also proposed
to be discontinued from 1st June, 2011. This would be negative for companies
developing SEZs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CONSTRUCTION
BUDGET HIGHLIGHTS & IMPACT
n Allocation for infrastructure sector is 23.3% higher than FY11
Impact: Positive. Allocation of nearly Rs 2140 bn has been made towards
infrastructure sector which is 23.3% higher than FY11. It forms nearly 48.5%
of the Gross Budgetary Support to plan expenditure. We expect this amount
to be utilized for development of physical infrastructure such as roads, ports,
airports, railways to sustain high economic growth. This would translate into
higher order inflows for companies present in these segments such as IRB Infra,
IVRCL, NCC, Simplex Infra and Unity Infra.
n Increased allocations for road, irrigation, housing and drinking water
supply
Impact: Positive. Allocation for road, irrigation, housing and drinking water
supply has been increased by Rs 100 bn to Rs 580 bn for FY12. This would
be done through Bharat Nirman which includes Pradhan Mantri Gram Sadak
Yojna (PMGSY), Accelerated Irrigation Benefit Programme, Rajiv Gandhi Grameen
Vidyutikaran Yojna, Indira Awas Yojna, National Rural Drinking Water Programme
and Rural telephony. We expect it to be positive for IVRCL, NCC, Pratibha
Industries and Unity Infra
n Tax free bonds for infrastructure development
Impact: Positive. Government has allowed tax free bonds of Rs 300 bn to give
boost to infrastructure development in railways, ports, housing and highways
development. This includes Indian Railway Finance Corporation 100 bn, National
Highway Authority of India Rs 100 bn, HUDCO Rs 50 bn and Ports Rs 50 bn.
This is expected to ease funds with these organizations and hence award more
projects.
n Hike in FII limit for infrastructure sector corporate bonds
Impact: Positive. FII limit for investment in corporate bonds of infrastructure
companies has been hiked from $5 bn to $25bn. This is likely to enhance the
flow of funds to the infrastructure sector and FIIs would also be allowed to
invest in unlisted bonds of of infrastructure SPV's with a minimum lock in period
of three years. This would be positive for companies having SPVs that are looking
for raising funds such as IVRCL, NCC, Madhucon Projects, IRB Infra.
n Infrastructure debt fund
Impact: Positive. Setting up of dedicated infrastructure debt fund has been
proposed to augment low cost funds from abroad for the infrastructure sector.
Income from that fund would be exempt from tax. It is also proposed that
any income received by non-resident from that fund shall be taxable at the
rate of 5% only. This is expected to ease liquidity for the infrastructure sector.
n Service tax exemption on few services
Impact: Positive. Service tax exemption is extended to works contract service
provided for construction or finishing of new residential complex under
Jawaharlal Nehru National urban renewal mission or Rajiv Awaas Yojana.
Exemption is also being provided for services provided within a port or airport
under 'Works contract' service for specified services. This would be positive
for construction companies carrying out works contract in these segments such
as Unity Infra, Pratibha Industries, NCC etc.
n Increase in MAT from 18% to 18.5%; surcharge reduced from 7.5% to 5%
Impact: Neutral. MAT has been increased from 18% to 18.5% but
correspondingly surcharge has been reduced from 7.5% to 5% so overall impact
in tax rate is not much. We expect this to be neutral for companies that fall
under MAT regime.
n MAT on SEZ's
Impact: Negative. Sunset clause has now been proposed for availability of
exemption from MAT in case of SEZ developers and units in SEZs. Thus, with
effect from FY12, SEZ developers or units operating in SEZs will have to pay
MAT. Along with this, exemption of dividend distribution tax is also proposed
to be discontinued from 1st June, 2011. This would be negative for companies
developing SEZs.
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