Copyright: Birla Sun Life Asset Management Company Ltd. 2008 Birla Sun Life Asset Management Company...

Copyright: Birla Sun Life Asset Management Company Ltd. 2008

Birla Sun Life Asset Management Company Ltd.

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2014-2015

Union Budget



Budget Overview 2014-15 GDP growth estimated between 5.4 - 5.9% as per the economic survey Fiscal deficit budgeted at 4.1 % of GDP Current account deficit expected at 2.1% of GDP Revenue deficit projected at 2.9% of GDP Net market borrowing to be Rs. 4.6 lakh crores

Key Budget Highlights

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Direct Taxes Exemption limit for the general category of individual taxpayers proposed

to be enhanced from Rs. 2,00,000 to Rs. 2,50,000 No change to the corporate tax rate Investment limit under section 80C of the Income-tax Act from Rs. 1 lakh

to Rs. 1.5 lakh Increase the deduction limit on account of interest on loan in respect of

self occupied house property from Rs. 1.5 lakh to Rs. 2 lakh 10 year tax holiday extended to undertakings which begin generation,

distribution and transmission by Fiscal 2017 A net revenue loss of Rs.22,200 crores estimated as a result of Direct Tax

proposals Investment allowance at the rate of 15% to manufacturing companies

investing more than Rs. 25 crores till March 2017

Key Tax Proposals

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Indirect Taxes

Excise duty on cigarettes raised from 11% to 72% across different cigarette lengths

Levy of additional duty of excise at 5% on aerated water containing sugar Service tax base has been broadened to cover radio, broadcast media,

mobile advertisement and radio taxis Tax proposal on the indirect tax side are estimated to yield 75.2Bn

Key Tax Proposals

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FY14 Deficit The fiscal deficit for FY14 was finally pegged at 4.5% of GDP v/s budget

estimates of 4.8% of GDP Sharp cut in planned expenditure key reason (10.8% growth vs BE of

29.4%) Revenues were running below budget estimates due to slowdown in

economic activity and shortfall in divestment receipts

FY15 budget math: More realistic The fiscal arithmetic is based on nominal GDP growth of 13.4%, total

revenues rising 15.6% and expenditure rising 10.8% GDP growth assumption moderately optimistic, expect receipts targets to

be met on account of non-tax revenues Higher expenditure budgeted for an investment starved economy Upside risks to fiscal deficit unlikely

Budget Math and Our View

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Revenues Growth in gross tax collections

estimated at 17.7%- Excise Duty 11.7%,- Customs Duty 15.0%,- Service Tax 30.7%, - Corporate Tax 14.6%- Income tax 26.8%

Budget Math and Our View

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Expenses Expenditures to rise by 10.9%

- Plan expenditure 16.8%- Non-plan expenditure 9.4%

The stated intent to limit subsidies at 2% of GDP implies increase in prices of regulated goods.



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Sectoral Impact



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Proposal Impact

Promote use of Piped Natural gas Increase in gas utilization positive for gas utilities

Excise duty on branded petrol is reduced from Rs7.5/liters to Rs2.35/liters

Mildly Positive for Downstream companies

Reduction in Basic Custom duty for propane, ethane, ethylene and propylene to 2.5% from current 5%

Mildly negative for domestic petrochemical sector

Implementation towards Direct Benefit transfer of Subsidies

Positive for upstream and downstream companies due to overall improvement in cash flows

Oil & GasBudget Impact: Neutral



Budget Impact: PositiveProposal Impact

• Acknowledgement of large capital requirement at PSU Banks of Rs 240 Lac Crs.

• Capital infusion in government banks of Rs.11,200 Crs.

• Intends to give greater autonomy to banks and consider consolidation of banks seriously

Neutral for PSU Banks, as quantum of infusion is lower than requirements. Further we would like to have clarity on how the remaining capital requirement needs will be met

Banks to be permitted to raise long term funds for lending to infrastructure sector with minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending

Positive for Infra-Finance as a segment, bigger beneficiaries are IDFC, PSU Banks and wholesale private banks

Deduction on housing loan interest has been increased to Rs 2 Lac (from Rs 1.5 Lac) and also deduction for principal payments (under 80C) has been increased to Rs 1.5 Lac (from Rs 1 Lac)

Positive for banks and housing finance companies

Proposed to increase foreign ownership limit in the insurance sector from 26% to 49% through the FIPB route – with Indian management and control

• Positive for insurance companies to raise Funding

• Help domestic financial institutions to monetize their stake

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Banking & Financial Services



Proposal Impact

Agriculture Credit:• Continuation of interest subvention scheme for timely

repayment.• Higher agriculture lending target of Rs 8 lac crores (up

14.3% YoY)

• Positive for agriculture sector asset quality for banks.

• Negative for PSU banks, as weak monsoon pose risk for NPLs

Rs 4,000 Crs for to increase the flow of cheaper credit for affordable housing to the urban poor/EWS/LIG segment and enhanced allocations of Rs 8,000 Crs under Rural Housing Fund

Positive for Housing Finance Companies

Financial inclusion roadmap by August-14

Could be negative for PSU Banks as government stressing on aggressive financial inclusion plans and unsecured credit to marginal depositors.

To open 6 Debt Recovery Tribunals in 6 citiesThis will facilitate faster recovery process for banks

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Banking & Financial ServicesBudget Impact: Positive



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Proposal Impact

Govt. to oversee that all power companies to get adequate coal supply

Positive for entire sector

Increase in basic custom duty on coal by 0.5% to 2.5% and Increase in clear energy cess to Rs100/tonne from current Rs50/tonne

Mildly negative for coal importers.

Launch of Deen Dayal Upadhyay Gram Jyoti Yojana at cost of Rs5bn for feeder separation in power distribution

Positive for transmission companies and cap goods cos in field of T&D reduction

Promotion of solar power through set-up of ultra mega solar projects and Reduction in custom duty and excise duty for inputs used in solar power panels

Positive as new business segment

Coal import duty for lower and higher grade coal bought at par at 2% Slightly positive for coal importing companies

Power & Utilities Budget Impact: Positive



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Proposal Impact

• 4% growth in agriculture• Farm credit increased to 8 lakh crore• System for mitigating price volatility in Agriculture produce (500

crs)• Set up new agricultural institutes, testing laboratories, agri tech

infrastructure fund (100 crs)• Drive agri pumps with solar energy (400 crs)• Plenty of schemes to improve cash flow in rural segments

Overall positive to improve farmer income and thereby increase usage of farm inputs

Subsidy provision increased to 73000 crs from 68000 crsMarginal increase to manage increase in raw material prices

1000 crore provided to assure irrigation in Pradhan Mantri Krishi Sinchayee Yojana

Positive for irrigation companies

Agri InputsBudget Impact: Positive



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Proposal Impact

Investment allowance of 15% in plant and machinery extended to all investments made above Rs250mn as compared to Rs1bn earlier for a period of 3 years. Earlier scheme ending in Mar'15 will continue to run parallel

Positive for all capital goods companies as it will help spur investments in medium and small enterprises

Power – New Feeder separation scheme to improve sub T&D infra & reduce losses

Feeder line separation to reduce T&D losses and lead to investment opportunity

Cut in excise duty (to 6%) on food processing equipment and packaged machinery equipment suppliers

Positive for select cap goods name

Composite cap on FDI in defense sector increased to 49% vs 24% earlier under FIPB route. Ownership control to be retained with India entity

Positive for Defense companies which can act as technology partner

Defense capex allocation increased to Rs94.6bn, up by Rs50bn over interim budget target

Positive for defense equipment providers

Infrastructure / Capital GoodsBudget Impact: Positive



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Proposal Impact

Road Development - Allocation of Rs. 37,850 Cr for roads (NHAI and state roads)- NHAI to target 8,000 km of road development

Positive for all Road developers

SMART CITIES - Allocation of Rs. 7060 Cr for smart citiesPositive for the sector- and Automation companies

REITS- Infra investment trusts (on line of REITs) to be set up to securities infra projects

Positive for Asset owner companies

Infra Activity - Rs. 100 Cr for kick starting Metro projects in Lucknow and Ahmedabad & Rs. 4000 Cr for Low cost Housing under National Housing Bank

Positive for EPC companies

Infrastructure / Capital GoodsBudget Impact: Positive



Proposal Impact

Increase in excise duty on cigarettes from 11-72%Companies will likely raise the prices due to which demand may be affected in the short-run

Footwear Industry: Excise reduction on Rs500-Rs1000 from 12% to 6%

Companies operating in this price point of the segment will benefit

Custom duty cut on crude palm fatty acid (key raw materials in soaps) from 7.5% to 0%

Companies operating in soap segment will benefit

Personal tax proposals would result in lower tax outgo for individual

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FMCG & RetailBudget Impact: Neutral



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Proposal Impact

Interest payments on housing loans under Sector 24b to Rs 2lakh from 1.5 lakh

Positive for affordable housing

REITs :To provide the necessary incentives and a conducive tax regime for REITs to in accordance with SEBI regulations

Positive for asset owners

Foreign Direct Investment in realty :Requirement of area has been reduced from 50,000 sq. mts. to 20,000 sq. mts. and from USD 10 mn to USD 5 mn

Positive for all developers

Real EstateBudget Impact: Positive



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Proposal Impact

Royalty on minerals expected to increase -ve for All companies with mines

Extension of sunset date for tax holiday for power plants under sec 80IA to March 2017

Positive for select companies implementing power projects

Import duty on stainless flat rolled steel from 5% to 7.5% Positive for Stainless Steel makers

Increased export duty on bauxite from 10% to 20% Positive for aluminum producers without captive bauxite

Duty structure on coal of various types is rationalized at 2.5% BCD and 2% CVD.BCD on Coking coal -> from NIL to 2.5%Steam coal and bituminous coal - >from 2% to 2.5%

Marginal negative for steel companies.

Imposed import duty of 2.5% on coke, in line with coal All large steel producers have captive coke. So, no impact.

Investment allowance @15% to manufacturing companies that invest more than INR250mn in plant & machinery.

Positive for all cos. As sector is capital intensive one

The rate of Clean Energy Cess levied on coal, lignite and peat is being increased from Rs.50/t to Rs. 100/t

Marginally –ve for all coal mining companies

Basic Customs Duty on coal tar pitch is being reduced from 10% to 5% Small positive for Aluminium producers

MetalsBudget Impact: Neutral



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Proposal Impact

Focus on urbanisation, urban infrastructure, urban development, asset creation through MNREGA and thrust on infrastructure projects

Positive for cement demand

Duty structure on coal of various types is rationalized at 2.5% BCD and 2% CVD. BCD Anthracite coal and other coal - >from 5% to 2.5% . CVD on Anthracite coal, Coking coal and other Coal is being reduced from 6% to 2%

Marginal positive for cement companies importing coal

Automobiles & Auto Ancillaries

Proposal Impact

Excise duty cut benefits as announced few days back will continue till Dec’14

This is encouraging as the extension of cut in excise duties should continue to support consumer sentiment

CementBudget Impact: Neutral

Budget Impact: Neutral



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Proposal Impact

Facility of Electronic Travel Authorization (e-Visa) to be introduced in phased manner at nine airports in India

Positive for the tourism economy

Rs. 500 Crs provided for developing 5 tourist circuits around specific themes

Rs. 100 Crs provided for National Mission on Pilgrimage Rejuvenation and Spiritual Augmentation Drive (PRASAD)

Rs. 200 Crs provided for National Heritage City Development and Augmentation Yojana (HRIDAY)

Rs. 100 Crs provided for Archaeological sites preservation

Sarnath-Gaya-Varanasi Buddhist circuit to be developed with world class tourist amenities to attract tourists from all over the world

Recognizing the urgent need to develop world class convention facilities, Government will fully support this initiative to develop the facilities in PPP mode through the VGF scheme

Travel & LeisureBudget Impact: Positive



Internal views, estimates, opinions of BSLAMC expressed herein may or may not materialize. These views, estimates, opinions alone are not sufficient and should not be used for the development or implementation of an investment strategy. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information Document(SID) of the scheme. Please refer to the SID for asset allocation, investment strategy and scheme specific risk factors. Forward looking statements are based on internal views and assumptions and subject to known and unknown risks and uncertainties which could materially impact or differ the actual results or performance from those expressed or implied under those statements.

This document is strictly confidential and meant for private circulation only and should not at any point of time be construed to be an invitation to the public for subscribing to the units of Birla Sun Life Mutual Fund. Please note that this is not an advertisement. The document is solely for the information and understanding of intended recipients only. If you are not the intended recipient, you are hereby notified that any use, distribution, reproduction or any action taken or omitted to be taken in reliance upon the same is prohibited and may be unlawful. Views expressed herein should not be construed as investment advice to any party and are not necessarily those of Birla Sun Life Asset Management Company Ltd.(BSLAMC) or any of their officers, employees, personnel, directors and BSLAMC and its officers, employees, personnel, directors do not accept responsibility for the editorial content. Wherever possible, all the figures and data given are dated, and the same may or may not be relevant at a future date. Further the opinions expressed and facts referred to in this document are subject to change without notice and BSLAMC is under no obligation to update the same. While utmost care has been exercised, BSLAMC or any of its officers, employees, personnel, directors make no representation or warranty, express or implied, as to the accuracy, completeness or reliability of the content and hereby disclaim any liability with regard to the same.

Recipients of this material should exercise due care and read the scheme information document (including if necessary, obtaining the advice of tax/legal/accounting/financial/other professional(s) prior to taking of any decision, acting or omitting to act. Further, the recipient shall not copy/circulate contents of this document, in part or in whole, or in any other manner whatsoever without prior and explicit approval of BSLAMC.

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Disclaimers



Statutory Details: Constitution: Birla Sun Life Mutual Fund (BSLMF) has been set up as a Trust under the Indian Trusts Act, 1882. Sponsors: Aditya Birla Financial Services Private Limited and Sun Life (India) AMC Investments Inc. (liability restricted to seed corpus of 1 Lac). Trustee: Birla Sun Life Trustee Company Pvt. Ltd. Investment Manager: Birla Sun Life Asset Management Company Ltd.

Risk Factors: Mutual Funds and securities investments are subject to market risks and there can be no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme may go up or down depending on the various factors and forces affecting capital markets and money markets. Past performance of the Sponsor / Investment Manager / Mutual Fund does not indicate the future performance of the Schemes and may not necessarily provide a basis of comparison with other investments. The names of the Schemes do not, in any manner, indicate either the quality of the Schemes or their future prospects or returns. Unitholders in the schemes are not being offered any guaranteed/assured returns. Investors should read the Statement of Additional Information / Scheme Information Document/ Key Information Memorandum available at Investor Service Centers and with distributors carefully before investing.

The Material provided in this communication cannot be reproduced or quoted anywhere without express permission from Birla Sun Life Asset Management Company Ltd.

Statutory Details & Risk Factors

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