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India Equity Research Reports, IPO and Stock News
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Cement NEGATIVE
We view the budget positively from a demand perspective for the cement sector, due to
the GOI’s continued focus on schemes like NREGS, Indira Awas Yojana etc. However,
the replacement of the 10% excise duty with an ad valorem duty should be negative for
the industry. We believe cement vendors will have limited ability to pass on the revised
duty structure to end customers as we anticipate over-supply (surplus of 19%) in FY12.
Key positives
Allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme
(MGNREGA) has been maintained at INR399.7b for FY12.
Spending on integrated housing and slum development has been increased to
INR10.0b in FY12, from INR5.78b in FY11.
Allocation for the Rajiv Awas Yojana scheme has been maintained at INR10.0b for
FY12.
There has been a marginal reduction in the allocation for the Indira Awas Yojana (IAY),
from INR93.25b to INR89.87b.
The GOI has also decided to index the wage rates notified under the MGNREGA to the
Consumer Price Index for agricultural labour.
Rural fund provision under the Rural Housing Fund has been enhanced to INR30b.
It has been proposed to reduce the basic custom duty on two critical raw materials –
petcoke and gypsum to 2.5%, from 5.0%.
Key negatives
In our view, replacement of 10% excise duty with an ad valorem duty is negative for the
sector and targeted towards keeping prices under control.
The duty structure for the packaged cement is: 1) if the retail price is
proposed rate of duty is 10% ad valorem + INR80/tonne; 2) if the retail price is
>INR190/bag, the proposed rate of duty is 10% ad valorem + INR160/tonne.
Aside from packaged cement, duty will be 10% ad valorem. The clinker sales will attract
a 10% ad valorem duty + INR200/tonne.
The excise duty exemption on fly ash has been withdrawn and will attract 1% duty
without CENVAT credit facility.
Impact: NEGATIVE
Top pick: Grasim
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cement NEGATIVE
We view the budget positively from a demand perspective for the cement sector, due to
the GOI’s continued focus on schemes like NREGS, Indira Awas Yojana etc. However,
the replacement of the 10% excise duty with an ad valorem duty should be negative for
the industry. We believe cement vendors will have limited ability to pass on the revised
duty structure to end customers as we anticipate over-supply (surplus of 19%) in FY12.
Key positives
Allocation for the Mahatma Gandhi National Rural Employment Guarantee Scheme
(MGNREGA) has been maintained at INR399.7b for FY12.
Spending on integrated housing and slum development has been increased to
INR10.0b in FY12, from INR5.78b in FY11.
Allocation for the Rajiv Awas Yojana scheme has been maintained at INR10.0b for
FY12.
There has been a marginal reduction in the allocation for the Indira Awas Yojana (IAY),
from INR93.25b to INR89.87b.
The GOI has also decided to index the wage rates notified under the MGNREGA to the
Consumer Price Index for agricultural labour.
Rural fund provision under the Rural Housing Fund has been enhanced to INR30b.
It has been proposed to reduce the basic custom duty on two critical raw materials –
petcoke and gypsum to 2.5%, from 5.0%.
Key negatives
In our view, replacement of 10% excise duty with an ad valorem duty is negative for the
sector and targeted towards keeping prices under control.
The duty structure for the packaged cement is: 1) if the retail price is
proposed rate of duty is 10% ad valorem + INR80/tonne; 2) if the retail price is
>INR190/bag, the proposed rate of duty is 10% ad valorem + INR160/tonne.
Aside from packaged cement, duty will be 10% ad valorem. The clinker sales will attract
a 10% ad valorem duty + INR200/tonne.
The excise duty exemption on fly ash has been withdrawn and will attract 1% duty
without CENVAT credit facility.
Impact: NEGATIVE
Top pick: Grasim
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