Union Budget FY 2020-21

Post Budget Analysis

www.axisdirect.in
 UNION BUDGET FY2020-21

Union Budget Highlights

Markets had gone with very high expectations into Budget 2020 in wake of decelerating economy and fiscal measures expected to revive the
same. Capital markets in particular had banked upon the Finance minster to take an objective outlook towards Long term capital gains tax
(LTCG) and scrap it or increase the investment period for qualifying for LTCG and abolish the dividend distribution tax (DDT) to avoid double
taxation. The outcome of the budget, have been short of market expectations on both counts, LTCG continues which is big disappointment for
capital markets while DDT has been abolished for companies but dividend would be taxed at the hands of the investors at their respective
applicable income tax rates.

The Finance Minister has tried to present a all new tax structure with an option to decide between the old and the new regime thereby putting
more disposable money in the hands of the salaried employees which could push them for spending on consumption both staples and
discretionary. Budget failed to address the much banked upon targeted move to revive the rural economy by increasing spends on MNREGA
and other rural infrastructure creation vehicles thus restricting the rural economic revival to the monsoon season.

The government has already declared the National Infrastructure Pipeline worth Rs 103 lakh cr. but the focused annual target and the roadmap
was awaited in the budget which was missing, hence the markets were disappointed. Markets were banking on concessions for Real Estate as
industry supports large scale employment but there was only a tax holiday extension of one year which would not be sufficient to revive the
industry. New power generation companies have been extended with 15% concessional tax rates which would play a part to revive the capital
goods sector esp. the BTG segment.

As far as fund raising is concerned, the Government has taken few good measures that would deepen the debt market viz., the FPI limits has
been increased to 15% (from 9% earlier), certain specified categories of government securities would be opened fully for NRIs (apart from
being open to domestic investors), float Debt ETF consisting of Govt. Securities. Divestment target for FY21 has been increased to Rs 2.1 lakh
cr. largely to be funded through IPO of LIC and IDBI stake sale. As widely expected the government has resorted to fiscal deficit of 3.8% for
FY20 taking help of the escape clause of FRBM act and set target of 3.5% for FY21; the expectations of reducing non-essential subsidies was
not addressed.

Overall, the budget was lacking in immediate measures to revive the economic health of the country. Now other triggers viz., the consumption
drive post the Rabi harvest, marriage season and arrival of monsoon will have to be eyed. On positive side there have been qualitative efforts
of instituting new taxpayer charter to end tax harassment, amend Companies Act to bring criminal liability in certain areas, make faceless
appeals along with new direct tax dispute settlement scheme etc. Since lot can be done outside budget, all eyes would be on Govt./ GST
Council to take sector specific measures (if any) to revive economy.

www.axisdirect.in
 UNION BUDGET FY2020-21

Key Sectoral Impact

Sector Key Budget Measures Impact

 Auto  Handholding support for exports of auto parts through a  Positive for Auto ancillaries exporting parts
scheme of Rs 1000 cr will be anchored by EXIM Bank outside India. i.e. Motherson Sumi, Suprajit Engg.,
together with SIDBI. Both these institutions would Minda Ind.s
contribute Rs 50 cr each. This Rs 100 cr would be
achieved towards equity and technical assistance. Debt
funding of Rs 900 cr from banks would be made available.

 Higher customs duty on auto-parts from 10% to 20%  Negative for Auto OEMs importing auto-parts.
Positive for Auto Ancillaries which produce these
parts locally like Lumax Industries, Minda Ind.s etc
 Rs 1.70 lakh cr for transport infrastructure in 2020-21.
 Positive for all auto players especially CV
manufacturers like Ashok Leyland and Tata
Motors

 Real Estate  Currently, while taxing income from capital gains, business  Positive for Residential housing developers like
profits and other sources in respect of transactions in real DLF, Godrej Properties, Prestige Estate, Sobha,
estate, if the consideration value is less than circle rate by Oberoi, etc
more than 5%, the difference is counted as income both in
the hands of the purchaser and seller, It is proposed to
increase the limit of 5% to 10%.

www.axisdirect.in
 UNION BUDGET FY2020-21

Key Sectoral Impact

Sector Key Budget Measures Impact

 FMCG  Allocation of Rs. 2.83 lakh cr for rural development, agri,  Positive : Rural consumption, FMCG Staples, TTK
horticulture, raising agri credit, PM KISAN Prestige, Hawkins Cooker, Hindustan Unilever,
Dabur, Emami, Marico, Jyothy Labs, Britannia, ITC,
Bajaj Corp, V2Retail, V-Mart Retail, Mold-Tek
Packaging
 Reduction in Income Tax Slabs (without  Positive: FMCG-Staples, Retail, Consumer
exemptions/deductions) to spur consumption Discretionary companies

 Doubling milk processing capacity from 53.5MT to 108MT  Positive: Parag Milk, Heritage Foods

 Rs. 12,300 cr allocation for Swacch Bharat Mission  Positive: Hindustan Unilever, ITC, P&G India, Godrej
Consumer Products, Jyothy Labs
 Withdrawal of Customs Duty on Skimmed Milk & certain milk  Positive: Britannia, Nestle India, ITC, Hindustan
products Unilever
 Allocation to nutrition related program enhanced to Rs.  Positive: Nestle India, Abbott India, GlaxoSmithkline
35,600 cr Consumer

 Customs Duty:  Negative:

 Peanut Butter (Withdrawn )  Agro Tech Foods Ltd
 Crude Palm Oil (Raised)  Hindustan Unilever, Godrej Consumer, ITC,
Jyothy Labs

www.axisdirect.in
 UNION BUDGET FY2020-21

Key Sectoral Impact

Sector Key Budget Measures Impact

 Tobacco &  Hike in Basic Excise Duty on cigarettes (filtered/non-filtered) of  Negative: ITC, Godfrey Phillips, VST Industries
Cigarettes
varying length leads to increased tax of ~6-8% per cigarette stick
 65mm from Rs. 5/1,000 sticks to Rs. 200/1,000 sticks
 Between 65-70mm from Rs. 5/1,000 sticks to Rs. 200/1,000
sticks
 Between 70-75mm from Rs. 5/1,000 sticks to Rs. 545/1,000
sticks
 7500 from Rs. 5/1,000 sticks to Rs. 735/1,000 sticks

 Banks  Deposit Insurance Coverage to increase from Rs 1 lakh to Rs 5  Increase in coverage is a positive move for
Lakh per depositor depositors post PMC Bank crisis, but may result in
 Proposal to sell balance holding (47%)of government in IDBI Bank increased costs of account servicing for banks. This
in stock exchanges will be eventually be passed on to the customers.
 No further capital infusion announced for PSU Banks, after However, Banks may benefit from growth in public
infusion of Rs 3.5 lac cr over last few years deposits.
 I-T losses post merger will be available for offset for PSBs  Positive for IDBI Bank
 Asked RBI to extend debt restructuring window for MSME by a  Negative for PSU Banks
year to March 31, 2021. Scheme will be introduced to provide  I-T clause for PSBs will help in merger process
subordinate debt for entrepreneurs of MSMEs.  Relief to MSMEs will help lenders in managing asset
quality in this space viz. City Union Bank, DCB Bank
etc.

 NBFCs  Eligibility limit for NBFCs for debt recovery under SARFAESI Act  This will be a boost for overall NBFCs currently
proposed to be reduced to asset size of Rs100 cr (from Rs 500 cr) facing tough liquidity environment
or loan size of Rs 50 Lakh  Increase in FPI limit will improve funding
 Partial credit guarantee scheme will be launched by the requirements
government
 FPI Limit for corporate bonds to be increased to 15% per cent.

www.axisdirect.in
 UNION BUDGET FY2020-21

Key Sectoral Impact

Sector Key Budget Measures Impact

 Power  Concessional tax rate for electricity generation companies: In  Positive for capital goods companies viz., BHEL, L&T
order to attract investment in the power sector, it is proposed
to extend the concessional corporate tax rate of 15%
provided by the Taxation Laws (Amendment) Act, 2019 to
new domestic companies that are engaged in the generation
of electricity subject to the condition that they start
generating electricity by 31st March, 2023
 Advise to shut thermal plants if they don't meet emission
norms

 Railways & Metro  150 new train to be introduced on PPP basis; Four  Positive for RITES, KEC Intl., IRCTC, Siemens & L&T
stations will be also be redevelopment with the help of PPP
 Rs 18,600 cr worth Bengaluru suburban transport project
launched
 More Tejas type trains for tourist destinations
 Actively pursue High Speed Train between Mumbai and
Ahmedabad

 Transportation  Rs 1.7 lakh cr allocated to transportation  Positive for Infrastructure & EPC companies viz.,
(Roads, Airports &  100 more airports to be set up by 2024 to support UDAN
L&T, RITES, KEC Intl.
Ports ) scheme
 Accelerated development of highways will be undertaken;  Cement Companies are also likely to get a boost on
Delhi-Mumbai expressway and two other projects to be the account of rising demand .
completed by 2023. Chennai-Bengaluru Expressway to be
started
 NHAI to monetize 12 lots of highway bundles of over 6,000
km before 2024

www.axisdirect.in
 UNION BUDGET FY2020-21

Key Sectoral Impact

Sector Key Budget Measures Impact

 Housing Finance  Extending tax holiday provided to developers building  Positive for companies like Aavas Financiers etc.
affordable housing projects by a year to March 2021 which are in the affordable housing space
 To extend the additional reduction of Rs 1.5 lakh for interest
paid on home loans taken for the purchase of affordable
housing by another year

 Insurance  To meet divestment target of Rs 2.1 lakh cr for FY21,  Negative for listed life insurance companies over
Government plans divesting stake in Life Insurance short-term viz. SBI Life, ICICI Pru, HDFC Life, Max
Corporation of India (LIC). Financial
 New Personal Tax regime where exemptions have been
withdrawn
 Under NIRVIK (Niryat Rin Vikas Yojana) scheme to provide  Likely negative for general insurance companies such
enhanced insurance cover and reduce premium for small as ICICI Lombard and New India Assurance
exporters

 Aviation  Setting up 100 new airports by 2024 under UDAAN Scheme  Positive: Spice Jet, Indigo, APL Apollo Tubes, VIP
 Doubling of Air Fleet to 1,000 Industries, Safari Industries,
 Launching of Krishi Udan scheme  Positive; Blue Dart, All Cargo

www.axisdirect.in
 UNION BUDGET FY2020-21

Key Sectoral Impact

Sector Key Budget Measures Impact

 Consumer  Increase of Customs Duty on :  Boost Make in India program – Positive for
Durables  Compressor of Refrigerator and Air conditioner companies like Amber Enterprises & Dixon
 PCBA of Cellular mobile phones Technologies as companies increase local sourcing
 Proposed scheme for encouraging manufacture of mobile
phones, electronic equipment and semi-conductor packaging

 Allocation of Rs 4,400 cr for ensuring cleaner air in cities  Positive for companies like Whirlpool, Bluestar,
above one mn Havells, Honeywell

 Gas distribution  To expand the national gas grid from the present 16200 km  Positive for Gas distribution companies like IGL,
to 27000 km MGL, Petronet LNG, Adani Gas, GAIL

 Infrastructure  Government to set up 5 new smart cities  Positive for companies like Schneider Electric
Infrastructure, Siemens, KEC International, APL
Apollo Tubes, Sterlite Technologies, Asian Paints,
Kalpataru Power Transmission

 IT, Telecom  Indian Government has vision to connect 1 lakh Gram  Positive: This will create huge spending for IT
Panchayat villages. Government to invest 60,000 crs. for infrastructure and Telecom infrastructure - Tech
Bharat Net program in FY21. Mahindra, Sterlite Technologies, etc

www.axisdirect.in
 UNION BUDGET FY2020-21

Key Sectoral Impact

Sector Key Budget Measures Impact

 Paints  Additional deduction of Rs. 1.5 lakh on home loan interest  Positive: Asian Paints, Berger Paints, Kansai Nerolac,
extended till March 2021 Pidilite Inds, Kajaria Ceramics, Cera Sanitaryware,
APL Apollo Tubes

 Footwear  Raised Customs Duty from 25% to 35%  Positive: Bata India, Relaxo Footwear

 Tourism  Allocated Rs. 2,500cr to promote Tourism  Positive: IndiGo, Spice Jet, Indian Hotels, Lemon
 Allocated Rs. 3,150cr for Ministry of Culture Tree hotels, Chalet Hotels, VIP Industries, Safari
 Developing 5 Archaeological sites with onsite museum Industries

 Agriculture  Rs 2.83 Lakh cr allocated to Irrigation and Rural Development:  Positive for Pipe companies Astral Poly, Supreme
Rs 3.6 Lakh cr for Jal Jivan Mission Industries & Finolex Industries

 Others  Raising fish production to 200 lakh tonnes by 2023  Positive: Apex Frozen, Avanti Feeds, The Waterbase
 Aim to raise fishery exports to Rs. 1 lakh cr by 2025 Ltd, Godrej Agrovet

 Rs. 1,480 cr allocated towards National Technical Textiles  Positive: Apparel manufacturers
Mission for 4 years

www.axisdirect.in
 UNION BUDGET FY2020-21

Disclaimer
Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

1. Axis Securities Ltd. (ASL) is a SEBI Registered Research Analyst having registration no. INH000000297. ASL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock
broking services, Depository participant services & distribution of various financial products. ASL is a subsidiary company of Axis Bank Ltd. Axis Bank Ltd. is a listed public company and one of India’s largest
private sector bank and has its various subsidiaries engaged in businesses of Asset management, NBFC, Merchant Banking, Trusteeship, Venture Capital, Stock Broking, the details in respect of which are
available on www.axisbank.com.

2. 2. ASL is registered with the Securities & Exchange Board of India (SEBI) for its stock broking & Depository participant business activities and with the Association of Mutual Funds of India (AMFI) for distribution
of financial products and also registered with IRDA as a corporate agent for insurance business activity.

3. ASL has no material adverse disciplinary history as on the date of publication of this report.

4. I/We, authors (Research team) and the name/s subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect my/our views about the subject issuer(s) or securities.
I/We (Research Analyst) also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. I/we or my/our relative or ASL
or its Associate does not have any financial interest in the subject company. Also I/we or my/our relative or ASL or its Associates may have beneficial ownership of 1% or more in the subject company at the end
of the month immediately preceding the date of publication of the Research Report. Since associates of ASL are engaged in various financial service businesses, they might have financial interests or beneficial
ownership in various companies including the subject company/companies mentioned in this report. I/we or my/our relative or ASL or its associate does not have any material conflict of interest. I/we have not
served as director / officer, etc. in the subject company in the last 12-month period.

Sr. No Name Designation E-mail

1 Pankaj Bobade Research Analyst [email protected]

2 Suvarna Joshi Research Analyst [email protected]
3 Siji Philip Research Analyst [email protected]
4 Omkar Tanksale Research Analyst [email protected]
5 Ankit Suchanti Research Associate [email protected]
6 Hiren Trivedi Research Associate [email protected]
7 Tanvi Shetty Research Associate [email protected]

5. ASL or its Associates has not received any compensation from the subject company in the past twelve months. I/We or ASL or its Associate has not been engaged in market making activity for the subject company.

6. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report, ASL or any of its associates may have:
i. Received compensation for investment banking, merchant banking or stock broking services or for any other services from the subject company of this research report and / or;
ii. Managed or co-managed public offering of the securities from the subject company of this research report and / or;
iii. Received compensation for products or services other than investment banking, merchant banking or stock broking services from the subject company of this research report;

ASL or any of its associates have not received compensation or other benefits from the subject company of this research report or any other third-party in connection with this report.

Term& Conditions:
This report has been prepared by ASL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way,
transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ASL. The report is based on the facts, figures and information
that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable.
Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are
subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ASL will not treat recipients as customers by virtue of their receiving
this report.

www.axisdirect.in
 UNION BUDGET FY2020-21

Disclaimer
Disclaimer:

Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to the recipient’s specific circumstances. The securities and
strategies discussed and opinions expressed, if any, in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and
needs of specific recipient.

This report may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this report should make such investigations as it deems necessary to arrive at an independent
evaluation of an investment in the securities of companies referred to in this report (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment.
Certain transactions, including those involving futures, options and other derivatives as well as non-investment grade securities involve substantial risk and are not suitable for all investors. ASL, its directors, analysts or
employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to,
fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. Past performance is not necessarily a guide to future performance. Investors
are advice necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ
materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ASL and its affiliated companies, their directors and employees may; (a) from time to time, have long or short position(s) in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any
other transaction involving such securities or earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or investment banker,
lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting this document. The Research reports are also available & published on AxisDirect website.
ASL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that ASL may have a potential
conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ASL may have
issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither this report nor any copy of it may be taken or transmitted into the United State (to U.S. Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or
redistributed in Japan or to any resident thereof. If this report is inadvertently sent or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication,
availability or use would be contrary to law, regulation or which would subject ASL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale
in all jurisdictions or to certain category of investors.

The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The Company
reserves the right to make modifications and alternations to this document as may be required from time to time without any prior notice. The views expressed are those of the analyst(s) and the Company may or may
not subscribe to all the views expressed therein. Copyright in this document vests with Axis Securities Limited.

Axis Securities Limited, Corporate office: Unit No. 2, Phoenix Market City, 15, LBS Road, Near Kamani Junction, Kurla (west), Mumbai-400070, Tel No. – 18002100808/022-61480808, Regd. off.- Axis House, 8th
Floor, Wadia International Centre, Pandurang Budhkar Marg, Worli, Mumbai – 400 025. Compliance Officer: Anand Shaha, Email: [email protected], Tel No: 022-42671582. SEBI-Portfolio Manager Reg.
No. INP000000654

www.axisdirect.in