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Infrastructure (Sandip Bansal)
Budget 2011 impact
Overall thrust on infrastructure spending has been maintained. Initiatives have
been taken by the government to increase finance availability for the sector.
Allocations across various schemes and on infrastructure sector have been hiked,
that will lead to increased spending. However, there was no announcement
regarding new schemes, programs or road-maps for the sector.
Key positives:
Government maintains spending thrust on infrastructure through increased
allocations across sectors. Initiatives have been taken by the government to
increase finance availability for the sector such as
— enhancement of for FII investment in corporate bonds for infra sector
from US$5bn to US$25bn, incentives for debt funds and
— allowing some government agencies to raise capital through issuance of
tax free bonds worth Rs300bn.
— The government has also announced formation of Group of Ministers to
consider all issues relating to reconciliation of environmental concerns.
Key negatives:
The government has decided to levy MAT on developers of special
economic zones (SEZs) as well as units operating in SEZs (this will reduce
the near-term profitability of SEZ developers and will also impact the
relative attractiveness of SEZs for various units that want to establish their
facilities).
No specific road-map, new schemes, relief measures have been announced to
provide a boost to the sector.
Stock impact:
Levy of MAT on Mundra Port is a negative for the stock, though the
valuation impact would not be as significant as the impact on near-term EPS
(as MAT credit would be available in later years). Also, there would a
corresponding impact on Adani enterprises as well (Mundra Port’s holding
company).
Sector view: Positive in the medium to long term
We believe infrastructure development in the country provides a significant
opportunity given the significant under-investment, we expect spending of
US$500bn in next five years in the sector. Infrastructure investments have
averaged about 5% of GDP over the past three Plan periods while government
plans are to step it up to 9% of GDP.
The growth opportunity is most significant in the power, railways and road
sectors. We believe corporates that can leverage a broad range of opportunities
and have strong project management, financial engineering, and execution skills
will be the key beneficiaries.
Top picks
Our top Buys in the sector are L&T, GVK and Nagarjuna Construction.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Infrastructure (Sandip Bansal)
Budget 2011 impact
Overall thrust on infrastructure spending has been maintained. Initiatives have
been taken by the government to increase finance availability for the sector.
Allocations across various schemes and on infrastructure sector have been hiked,
that will lead to increased spending. However, there was no announcement
regarding new schemes, programs or road-maps for the sector.
Key positives:
Government maintains spending thrust on infrastructure through increased
allocations across sectors. Initiatives have been taken by the government to
increase finance availability for the sector such as
— enhancement of for FII investment in corporate bonds for infra sector
from US$5bn to US$25bn, incentives for debt funds and
— allowing some government agencies to raise capital through issuance of
tax free bonds worth Rs300bn.
— The government has also announced formation of Group of Ministers to
consider all issues relating to reconciliation of environmental concerns.
Key negatives:
The government has decided to levy MAT on developers of special
economic zones (SEZs) as well as units operating in SEZs (this will reduce
the near-term profitability of SEZ developers and will also impact the
relative attractiveness of SEZs for various units that want to establish their
facilities).
No specific road-map, new schemes, relief measures have been announced to
provide a boost to the sector.
Stock impact:
Levy of MAT on Mundra Port is a negative for the stock, though the
valuation impact would not be as significant as the impact on near-term EPS
(as MAT credit would be available in later years). Also, there would a
corresponding impact on Adani enterprises as well (Mundra Port’s holding
company).
Sector view: Positive in the medium to long term
We believe infrastructure development in the country provides a significant
opportunity given the significant under-investment, we expect spending of
US$500bn in next five years in the sector. Infrastructure investments have
averaged about 5% of GDP over the past three Plan periods while government
plans are to step it up to 9% of GDP.
The growth opportunity is most significant in the power, railways and road
sectors. We believe corporates that can leverage a broad range of opportunities
and have strong project management, financial engineering, and execution skills
will be the key beneficiaries.
Top picks
Our top Buys in the sector are L&T, GVK and Nagarjuna Construction.
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