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Union Budget 2012-13 Review

Please refer to important disclosures at the end of this report

Union Budget 2012-2013

A Pragmatic Budget

The markets had broadly come to terms with the fact that the

government is shackled by political and fiscal considerations

and is not in a position to deliver major reformist budgets.

In the backdrop of these modest expectations, Union Budget

2012-13 comes across as a job reasonably done. Somewhere,

if after the UP elections there was some degree of concern that

populism may hold sway, this budget at least dismisses those

concerns by increasing tax revenue significantly and not

indulging into any major populist expenditure increases. Overall,

having taken the budget in its stride, from here on the market is

likely to look at the progression of the monetary policy, inflation

and interest rates the decline in which is, in our view, an

ongoing positive for the GDP outlook and corporate earnings

for FY2013.

Looking at FY2012 revised estimates: Fiscal deficit

slipped to 5.9%

The government expects to end FY2012 with a fiscal deficit of

5.9%, much higher than 4.6% estimated earlier, largely due to

higher subsidies, lower divestments and lower corporate taxcollections. Revised estimates for subsidy expenses highlight the

significant overshooting by around `73,000cr on account of

the earlier over-optimistic estimate, higher crude prices and

rupee depreciation. Lower corporate earnings growth due to

high inflation and interest rates led to expected corporate tax

revenue falling short by around `32,000cr. Further, weaker

sentiments in equity markets affected the government's

divestment plan, and revenue shortfall on that front stands at

around `24,500cr. Overall, government revenue mobilization

(both revenue and non-debt capital receipts) fell short by around

`48,000cr than the budgeted estimates.

Further, due to significant overshooting of the subsidy bill, total

expenditure exceeded budgeted estimates by around`61,000cr,

which had to be met by higher market borrowings of

`1,50,000cr, though aided in a large part by the RBI's

`1,20,000cr open market operations.

Exhibit 1: Lower-than-budgeted receipts in FY2012

PPPPParticulars (articulars (articulars (articulars (articulars (````` cr)cr)cr)cr)cr) FY2012BEFY2012BEFY2012BEFY2012BEFY2012BE FY2012REFY2012REFY2012REFY2012REFY2012RE VVVVVariancearianceariancearianceariance

Center's net tax rev.

(due to lower corp. taxes) 664,457 642,252 (22,205)

Total non tax revenue 125,435 124,737 (698)

Total non debt cap. receipts

(due to lower divestments) 55,020 29,751 (25,269)

Total receipts other than

debt receipts 844,912 796,740 (48,172)

Debt receiptsDebt receiptsDebt receiptsDebt receiptsDebt receipts 392,816392,816392,816392,816392,816 546,644546,644546,644546,644546,644 153,828153,828153,828153,828153,828

Cash balance 20,000 (24,664) (44,664)

TTTTTotal receipts incl. debt receiptsotal receipts incl. debt receiptsotal receipts incl. debt receiptsotal receipts incl. debt receiptsotal receipts incl. debt receipts 1,257,7291,257,7291,257,7291,257,7291,257,729 1,318,7201,318,7201,318,7201,318,7201,318,720 60,99160,99160,99160,99160,991

Exhibit 2: coupled with higher-than-budgeted expenditure in FY2012

Source: Budget documents, Angel Research

PPPPParticulars (articulars (articulars (articulars (articulars (`````

cr)cr)cr)cr)cr) FY2012 BEFY2012 BEFY2012 BEFY2012 BEFY2012 BE FY2012 REFY2012 REFY2012 REFY2012 REFY2012 RE variancevariancevariancevariancevarianceInterest 267,986 275,618 7,632

Defense 95,216 104,793 9,577

Subsidies 143,570 216,297 72,727

Total revenue non-plan exp. 733,558 815,740 82,182

Total capital non-plan exp. 82,624 76,376 (6,248)

TTTTTotal non-plan exp.otal non-plan exp.otal non-plan exp.otal non-plan exp.otal non-plan exp. 816,182816,182816,182816,182816,182 892,116892,116892,116892,116892,116 75,93475,93475,93475,93475,934

Central plan exp. 268,287 252,597 (15,690)

Total revenue plan exp. 363,604 346,201 (17,403)

Total capital plan exp. 77,943 80,404 2,461

TTTTTotal Plan exp.otal Plan exp.otal Plan exp.otal Plan exp.otal Plan exp. 441,547441,547441,547441,547441,547 426,604426,604426,604426,604426,604 (14,943)(14,943)(14,943)(14,943)(14,943)

TTTTTotal expenditureotal expenditureotal expenditureotal expenditureotal expenditure 1,257,7291,257,7291,257,7291,257,7291,257,729 1,318,7201,318,7201,318,7201,318,7201,318,720 60,99160,99160,99160,99160,991

FY2013 targets fiscal deficit reduction to 5.1%;Tax revenue credibly supported

The government plans to correct the worsening fiscal situation

in FY2013 by implementing several revenue augmentation

measures, mainly in tax revenue, and expects to end the year

with fiscal deficit at 5.1%. Tax revenue is expected to increase

substantially by around `1,29,000cr over the revised estimates

for FY2012, mainly aided by a widely anticipated 200bpincrease in excise rates and service tax rates and widening of

service tax with the introduction of negative list approach.

Nominal GDP growth of ~13% is expected to aid higher

corporate tax revenue by a largely similar quantum on the direct

tax front. The resulting estimated increase in overall tax revenue

by 50bp of GDP is the key contributor to the targeted reduction

in fiscal deficit. Further, the government expects to increase other

non-tax revenue and non-debt capital receipts by around

`52,000cr mainly on account of `40,000cr from telecom

spectrum auction and `30,000cr from divestment - again not

over-ambitious targets.


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Exhibit 3:Analysis of budgeted tax revenue receipts in FY2013 over FY2012


PPPPParticulars (articulars (articulars (articulars (articulars (````` cr)cr)cr)cr)cr) FY2012REFY2012REFY2012REFY2012REFY2012RE FY2013BEFY2013BEFY2013BEFY2013BEFY2013BE VVVVVariancearianceariancearianceariance

Total income tax 327,680 373,227 45,547

Taxes on income 171,879 195,786 23,907

Customs 153,000 186,694 33,694

Union excise duties 150,696 194,350 43,654

Service tax 95,000 124,000 29,000

Taxes on Union Territories 3,409 3,554 145

Less NCCD transfer 3,998 4,620 622

Less State's share 255,414 301,921 46,507

Center's net tax revenueCenter's net tax revenueCenter's net tax revenueCenter's net tax revenueCenter's net tax revenue 642,252642,252642,252642,252642,252 771,071771,071771,071771,071771,071 128,819128,819128,819128,819128,819

(as % to GDP)(as % to GDP)(as % to GDP)(as % to GDP)(as % to GDP)

Total income tax 3.7 3.7 0.0

Taxes on income 1.9 1.9 0.0

Customs 1.7 1.9 0.1

Union excise duties 1.7 1.9 0.2

Service tax 1.1 1.2 0.2

Taxes on Union Territories 0.0 0.0 (0.0)

Less NCCD transfer 0.0 0.0 0.0

Less State's share 2.9 3.0 0.1

Center's net tax revenueCenter's net tax revenueCenter's net tax revenueCenter's net tax revenueCenter's net tax revenue 7.27.27.27.27.2 7.77.77.77.77.7 0.50.50.50.50.5

Exhibit 4: Analysis of non -tax and non-debt cap. receipts in FY13 vs. FY12


Interest receipts 20,125 19,231 (894)

Dividend and profits 50,122 50,153 31

External grants 3,477 2,887 (590)

Other non-tax revenue

Mainly spectrum auction 49,909 91,207 41,298

Receipts of Union Territories 1,105 1,136 31

TTTTTotal non-tax revenueotal non-tax revenueotal non-tax revenueotal non-tax revenueotal non-tax revenue 124,737124,737124,737124,737124,737 164,614164,614164,614164,614164,614 39,87739,87739,87739,87739,877

Recoveries of loans and adv. 14,258 11,650 (2,608)

Divestment receipts 15,493 30,000 14,507

TTTTTotal non-otal non-otal non-otal non-otal non-debt capital receiptsdebt capital receiptsdebt capital receiptsdebt capital receiptsdebt capital receipts 29,75129,75129,75129,75129,751 41,65041,65041,65041,65041,650 11,89911,89911,89911,89911,899


Exhibit 5: Analysis of debt receipts in FY2013 over FY2012


Total receipts otherotal receipts otherotal receipts otherotal receipts otherotal receipts other

than debt receiptsthan debt receiptsthan debt receiptsthan debt receiptsthan debt receipts 796,740796,740796,740796,740796,740 977,335977,335977,335977,335977,335 180,595180,595180,595180,595180,595


TTTTTotal fiscal deficitotal fiscal deficitotal fiscal deficitotal fiscal deficitotal fiscal deficit 521,980521,980521,980521,980521,980 513,590513,590513,590513,590513,590 (8,390)(8,390)(8,390)(8,390)(8,390)

(as % of GDP) 5.9 5.1 0.8

Market loans 436,414 479,000 42,586

Short-term borrowings 116,084 9,000 (107,084)

Other receipts (5,853) 25,591 31,444

Cash balanceCash balanceCash balanceCash balanceCash balance (24,664)(24,664)(24,664)(24,664)(24,664) ----- 24,66424,66424,66424,66424,664


On the expenditure side, the increase in total non-plan

expenditure has been capped at 8.7% over FY2012 revised

estimates and is mainly on account of the essential increase in

interest, defense, police, pension and other general services

expenses and largely exhibits substantial restraint. On the plan

expenditure side, the budget builds in a 22.1% increase from

the revised estimates of FY2012 on account of the increase in

central and state planned spending. This is relatively on the

higher side and, in our view, leaves relatively little margin of

error for the government on the non-plan front if the overall

fiscal deficit and market borrowing targets are to be met.

Exhibit 6:Analysis of budgeted expenditure in FY2013 over FY2012


Interest 275,618 319,759 44,141

Defense 104,793 113,829 9,036

Subsidies 216,297 190,015 (26,282)

Total revenue non-plan exp. 815,740 865,596 49,856

Total capital non-plan exp. 76,376 104,304 27,928

TTTTTotal non-plan exp.otal non-plan exp.otal non-plan exp.otal non-plan exp.otal non-plan exp. 892,116892,116892,116892,116892,116 969,900969,900969,900969,900969,900 77,78477,78477,78477,78477,784

Central plan exp. 252,597 303,528 50,931

Total revenue plan exp. 346,201 420,513 74,312

Total capital plan exp. 80,404 100,512 20,108

TTTTTotal Plan exp.otal Plan exp.otal Plan exp.otal Plan exp.otal Plan exp. 426,604426,604426,604426,604426,604 521,025521,025521,025521,025521,025 94,42194,42194,42194,42194,421



The major item of non-plan expenditure, which is projected at

much lower levels than in FY2012, is subsidy outgo. In FY2012,

when average crude prices were about US$113 and Mumbai

petrol and diesel prices averaged about `69 and `45,

respectively, fuel subsidy amounted to`68,481cr. Crude prices

are currently at US$124 and petrol and diesel prices are almost

at the same levels as in FY2012, so either crude prices need to

come down significantly to even below FY2011 average levels

(difficult considering the current concerns in the Middle East) or

the government would have to hike petrol and diesel prices.

Absence of action on that front would pose a major risk to

budget estimates.


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subvention of 3% for prompt payments. Other measures include

operationalization of Irrigation and Water Resource Finance

Corporation, increasing food grain storage capacity, full

exemption of basic custom duty on equipment for setting up

fertilizer plants till March 31, 2015, and higher allocation to

various programmes such as Accelerated Irrigation Benefit

Programme (AIBP) (`14,242cr in FY2013 from around

`10,950cr in FY2012), Rashtriya Krishi Vikas Yojana (RKVY)

(`9,217cr in FY2013 from `7,860cr in FY2012) and Bringing

Green Revolution to Eastern India (BGREI) (`1,000cr in FY2013

from 400cr in FY2012). These measures will also aid the lagging

agriculture GDP growth apart from keeping food inflation undercheck.

Infrastructure Got the desired focus

In FY2012, the infrastructure sector was plagued by several

headwinds - such as depleting order books, high interest rates

and policy paralysis - resulting in execution slowdown and

shrinking bottom line of most infrastructure companies. Positively,

infrastructure development remained high on the agenda of

the budget. The budget has introduced several measures such

as lowering the rate of withholding tax on interest payments on

three-year ECBs for funding infrastructure projects and

encouraging public private partnerships in road construction

projects by allowing ECBs for capital expenditure on the

maintenance and operations of toll systems for roads and

highways. It has added capital investment in irrigation, fertilizers,

telecom towers and oil and gas to the list of eligible items for

viability gap funding. In terms of infrastructure ordering, it targets

to award 8,800km of road projects in FY2013 by NHAI vs.

7,300km in FY2012 and has increased allocation to National

Highway Development Programme (NHDP) and Accelerated

Irrigation Benefit Programme (AIBP) in FY2013 by 14% and13%, respectively.

Power - Process of addressing concerns continued

The power sector is another sector that has received extended

attention (quite needed) from the budget this time around. There

were various favorable announcements in the budget for the

sector, which has been grappling with fuel shortage, elevated

price of imported coal and poor financial situation of SEBs.

Major announcements included waiving off basic custom duty

on coal imports until FY2014 and extension of 80-IA benefits

until FY2013. Waiving off basic custom duty on coal is expected

to partially address the fuel availability issue and would be more

beneficial for companies relying on imported coal for running

Exhibit 7: Subsidy estimates appear optimistic

PPPPParticulars (articulars (articulars (articulars (articulars (````` cr)cr)cr)cr)cr) FY2012BEFY2012BEFY2012BEFY2012BEFY2012BE FY2012REFY2012REFY2012REFY2012REFY2012RE VVVVVariancearianceariancearianceariance

Fertilizer subsidy 67,199 60,974 (6,225)

Food subsidy 72,823 75,000 2,177

Petroleum subsidy 68,481 43,580 (24,901)

Interest subsidy 5,791 7,968 2,176

Other subsidies 2,002 2,493 491

TTTTTotal subsidiesotal subsidiesotal subsidiesotal subsidiesotal subsidies 216,297216,297216,297216,297216,297 190,015190,015190,015190,015190,015 (26,282)(26,282)(26,282)(26,282)(26,282)


Exhibit 8: Significant catch-up left on domestic petrol/diesel prices

FYFYFYFYFY PPPPPetrol/Ltretrol/Ltretrol/Ltretrol/Ltretrol/Ltr..... Diesel/LtrDiesel/LtrDiesel/LtrDiesel/LtrDiesel/Ltr..... Crude BrentCrude BrentCrude BrentCrude BrentCrude Brent SubsidySubsidySubsidySubsidySubsidy

(((((`````))))) (((((`````))))) (US $)(US $)(US $)(US $)(US $) (((((````` cr)cr)cr)cr)cr)

2011 57 42 87 38,371

2012 69 45 113 68,481

2013# 71 45 124 43,580

Source: Bloomberg, Angel Research. Note: FY2013# Petrol, Diesel, Crude

prices reflect current prices

Channelizing different sources of funds to aid coolingof interest rates

Continuing the trend seen in the past few years of increasing

the availability of funds to the economy, especially to the

infrastructure and priority sectors, in this budget as well key

announcements were made on that front. These include doubling

the fresh issue amount of tax-free bonds to `60,000cr and

reduction in withholding tax rate for three-year ECBs taken to

fund infrastructure projects. The budget also continues to address

medium-term capital constraints for PSU banks (`15,888cr

capital infusion budgeted this year). It also seeks to allow QFIs

to access corporate bond markets and has introduced special

Rajiv Gandhi Equity Saving Scheme to provide tax sops for

individuals having income less than `10lakhs making fresh

investment directly in equities up to`

50,000. The increase incustoms duty on gold also aims to nudge higher savings into

productive financial assets and aid in reducing the current

account deficit.

Continuation of steps to remove agri supply constraints

The government has continued its focus on removing supply

bottlenecks in agriculture, both in production as well as in supply

chain. Even though food inflation has currently declined, the

government has not shown complacency and has in fact taken

several appropriate measures to address structural supply

constraints. On expected lines, agricultural credit target has beenraised by`1,00,000cr to `5,75,000cr in FY2013 and interest

subvention scheme has been continued along with additional


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Exhibit 9: Sectoral Impact

Source: Angel Research

SectorSectorSectorSectorSector Overall impactOverall impactOverall impactOverall impactOverall impact

Agriculture Positive

Automobile Negative

Aviation Neutral

Banking Positive

Capital Goods Positive

Cement Positive

FMCG Negative

Infrastructure Positive

IT NeutralMetals Neutral

Oil & Gas Negative

Pharmaceutical Positive

Power Positive

Real Estate Neutral

Telecom Neutral

their plants. Other positive announcements for the power sector

(mostly on the financing side) include tax-free bonds of

`10,000cr for financing the power sector, allowing ECBs for

part financing rupee debts of the existing power projects and

reduction of withholding tax on interest payments on ECBs from

20% to 5%. These measures come on the back of the recent

PMO missive to Coal India to sign FSAs up to 80% of the fuel

requirement of power companies - highlighting the government's

commitment to undo some of the negatives for the sector.

Conclusion

Overall, Union Budget 2012-13 looks more credible in itsestimates than last year's budget. First, the increase in excise

and service tax rates as well as the increase in the ambit of

service tax was on expected lines and makes the budget's revenue

estimates more believable. On the subsidy front, some degree

of under-estimation is nothing new - overall, there may be some

slippage in the deficit because of this, but provided the

government delivers on its intent to increase retail oil prices, the

fiscal deficit is still likely to be 40-50bp lower than that in FY2012,

which is a key positive for the economy. It will allow the RBI to

reduce rates faster and will be positive for GDP growth and

especially for interest- sensitive sectors such as banking,

infrastructure and real estate. Oil and gas was amongst the key

sectors that were negatively impacted (increase of cess on crude

oil for Cairn and ONGC).

Overall, within its set of constraints, in our view this will go

down as a reasonable, pragmatic budget, which is unlikely to

have a major impact on markets in either direction. Going

forward, markets will start looking beyond the budget, wherein

the global environment has changed materially for the better in

the last couple of months. With the ECB's pragmatic and

comprehensive LTRO liquidity infusions of about Euro1trillion,

the Euro crisis looks more or less behind us. Moreover, lower

global growth has led to lower commodity prices (other than

crude, which is likely to be range-bound), improving the outlook

for emerging markets such as India. As a result, we are seeing

healthy investment inflows and with the inflation and interest

rate outlook becoming relatively benign, we remain positive on

the outlook for the markets going ahead.


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Sectoral Impact

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Aviation companies have been allowed to raise money

(up to US$1bn) through ECBs for their working capital

requirements for a period of one year.

Proposal to allow FDI of up to 49% by foreign airlines is

still being considered by the government.

The government has reiterated direct import of Aviation

Turbine Fuel (ATF) for Indian carriers.

Companies, such as SpiceJet, with relatively healthy

balance sheets and good repayment history may be

benefitted from this.

This has come as a disappointment for companies under

severe financial stress, as they were relying on FDI to raise

capital for running their operations.

This move is positive for aviation companies, as it would

reduce ATF cost, which accounts for 50% of the total

operating cost of a company. However, this development

has a low probability of benefiting aviation companies in

the short term, as we believe companies do not have the

required infrastructure or capital to build the infrastructurerequired to import ATF directly.

Announcement Impact

Aviation Neutral

Automobile Negative

Basic excise duty raised from 10% to 12%. Excise duty on

large cars increased to 24% from 22%.

Excise duty on specified parts of hybrid vehicles is being

reduced from 10% to 6%.

General budgetary measures: Higher subvention

for farmers and higher allocation to rural credit at

`5.75lakh cr (`4.60lakh cr earlier).

Slightly negative for all OEMs, but is on expected lines.

We expect the entire hike to be passed on to customers,

without any material impact on volume growth outlook.

This would promote the manufacture, sale and usage of

such vehicles in India.

This increase in allocation under Rural Development

Program is positive for auto companies having a rural

presence, such as M&M and Hero Honda.

Announcement Impact

CompanyCompanyCompanyCompanyCompany RecoRecoRecoRecoReco CMPCMPCMPCMPCMP TTTTTarget Parget Parget Parget Parget Pricericericericerice EPS (EPS (EPS (EPS (EPS (`````))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) EV/EBITDEV/EBITDEV/EBITDEV/EBITDEV/EBITDA (x)A (x)A (x)A (x)A (x)

(((((`````))))) (((((`````))))) FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E

Ashok Leyland Buy 28 32 2.2 2.7 12.5 10.1 6.7 6.7

M & M Buy 677 785 42.6 47.2 15.9 14.3 9.1 9.1

Top Picks

Source: Company, Angel Research; Note: * Consolidated results; Note: Price as on March 16, 2012

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Banking Positive

Capital infusion of `15,888cr in PSU banks, RRBs and

other financial institutions. The government is also

considering creation of a financial holding company,

which will raise resources to meet the capital requirements

of public sector banks.

Credit flow for farmers raised from `4,75,000cr to

`5,75,000cr.

Interest subvention to farmers retained and has been

introduced for women SHGs to avail loans up to`3lakhs

at 7%, with further interest subvention of 3% on prompt

payment.

Custom duty increased on standard gold imports.

Micro Finance Institutions (Development and Regulation)

Bill 2012, Pension Fund Regulatory and DevelopmentAuthority Bill 2011, Banking Laws (Amendment) Bill 2011

and Insurance Laws (Amendment) Bill 2008 to be moved

in this session of the parliament.

Enable PSUs to grow at a healthy rate and move

progressively towards meeting the more stringent tier-I

CAR requirements of Basel-III.

Slightly negative, considering the lower yields and higher

NPAs generally associated with agri-based lending.

Could assist in reducing rural NPAs for banks.

Positive for banks as it would help channelize higher

savings into financial investments, aiding the downward

trajectory of interest rates.

Positive for the financial sector, especially the micro finance

institutions sector, which has been in turmoil ever sincethe Andhra Pradesh government set stringent norms on

lending and interest collection within the state.

Announcement Impact

In our view, the budget was broadly positive for the banking sector. Healthy capital allocation of ~`16,000cr for the recapitalization

of PSU banks is expected to strengthen credit growth, while specific measures such as the increase in custom duty on gold imports

is likely to channelize higher savings into financial investments, including bank deposits. Introduction of Microfinance Institutions

Bill, which will supersede state government laws, will provide a big boost to the struggling micro finance industry.

From the fiscal deficit point of view, the government refrained from having any populist measures, which will come as a sigh of relieffor the banking sector. Commencement of easing monetary policy, apart from moderation in inflation, is also hinged on signs of

credible fiscal consolidation, which we feel was by and large delivered in Union Budget 2012-13.

CompanyCompanyCompanyCompanyCompany RecoRecoRecoRecoReco CMPCMPCMPCMPCMP TTTTTarget Parget Parget Parget Parget Pricericericericerice EPS (EPS (EPS (EPS (EPS (`````))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) P/ABP/ABP/ABP/ABP/ABV (x)V (x)V (x)V (x)V (x)


Axis Bank Buy 1,214 1,671 101.7 115.4 11.9 10.5 2.2 2.0

ICICI Bank Buy 917 1,193 54.6 63.9 16.8 14.4 1.8 1.7

Yes Bank Buy 367 478 28.1 33.2 13.1 11.1 2.7 2.3

St. Bank of India Buy 2,228 2,587 172.8 202.8 12.9 11.0 2.1 1.7Bank of Baroda Buy 809 951 117.6 126.0 6.9 6.4 1.3 1.1

Top Picks

Source: Company, Angel Research; Note: Price as on March 16, 2012

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Low cost of funds and fuel for the power sector will lend a

fillip to execute power projects, thus implying improved

order inflow for capital goods companies.

Would help in attracting private investment in PPP projects.

Steps to ease funding constraints in new project

investments would help revive the asset creation cycle

through order inflows, thus benefiting the sector.

Negative for companies making power generation

equipment, such as BHEL and BGR Energy.

Announcement Impact

Power sector to issue tax-free bonds worth`10,000cr for

financing projects; ECBs to part finance rupee debt of

power projects; And customs duty on imported coal to be

waived off.

Capital investment in sectors such as fertilizers, telecom

towers and oil and gas has been made eligible for viability

gap funding.

No announcement was made on the widely anticipated

imposition of import duty on power generation equipment,

which would have reduced the price differential between

domestic and overseas players (especially Chinese

players).

Capital Goods Positive


(((((`````))))) (((((`````))))) FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013EJyoti Structures Buy 45 54 11.9 10.9 3.8 4.2 3.6 3.0

Top Picks


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The graded excise duty structure based on retail selling

price slabs, which were applicable to cement

manufactured and cleared in packaged form, has been

removed for mini cement plants as well as for non-mini

cement plants. As per the announced duty structure, excise

duty on cement cleared from mini cement plants in

packaged form will be 6% along with additional charge

of `120/tonne; while duty on cement cleared from other

than mini cement plant will be 12% along with additional

charge of `120/tonne. The duty will be charged on the

retail selling price with an abatement of 30%.

Basic custom duty on imported coal has been waived off

until FY2014.

We expect cement manufacturers to pass on the hike in

excise duty to consumers by increasing cement prices.

India's cement sector is highly dependent on imported

coal. Prices of domestic as well as imported coal have

increased considerably over the past one year. Thus, the

waiver of basic custom duty on imported coal is positive

for the sector.

Announcement Impact

Cement Positive

CompanyCompanyCompanyCompanyCompany RecoRecoRecoRecoReco CMPCMPCMPCMPCMP TTTTTarget Parget Parget Parget Parget Pricericericericerice P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) EV/EBITDEV/EBITDEV/EBITDEV/EBITDEV/EBITDA (x)A (x)A (x)A (x)A (x) EV/tonne (EV/tonne (EV/tonne (EV/tonne (EV/tonne ($$$$$)))))

(((((`````))))) (((((`````))))) FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013EJK Lakshmi Cem. Buy 63 79 5.5 4.6 3.8 2.6 34 28

Top Picks


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Hike in excise duty on cigarettes (more than 65mm in

length) by adding an ad valorem component of 10% to

existing specific rates. The ad valorem duty would be 50%

of the retail sale price declared on the pack.

Allocation to NREGA at `33,000cr, down from`40,000cr

in Union Budget 2011-12.

Reduction in basic customs duty on titanium dioxide from

10% to 7.5%.

We had also anticipated some hike in the excise duty

on cigarettes, as it was not changed in Union

Budget 2011-12. We expect manufacturers to pass

on this hike to consumers. Thus, we expect the impact to

be Neutral for ITC, VST Industries, Godfrey Phillips.

Reduction in the allocation to NREGA is negative for

the FMCG sector, as it could reduce the disposable

income in the hands of rural households. Negative

for all FMCG players.

Reduction in basic customs duty on titanium dioxide, a

raw material used to manufactured paint, is positive for

paint makers such as Asian Paints, Kansai Nerolac, Berger

Paints and Akzo India.

Announcement Impact

FMCG Negative

Further, there has not been any concrete announcement regarding the rollout of GST, which is a disappointment for the

FMCG sector.

Telecom Neutral

The budget indicated that the government expects to raise

`40,000cr through 2G spectrum auction.

Exemption of basic customs duty on accessories of mobile

handsets has now been extended to parts, components

and sub-parts of parts and components required for

manufacturing memory cards for mobile phones.

Increased focus on social schemes such as NREGA

This is slightly higher than what was expected and is likely

to put financial burden on all telecom companies, who

are already in a dire need of funding post the 3G and

BWA auctions. However, most of this impact has already

been priced in the stock prices.

This is marginally positive for the sector as mobile handset

growth will likely get a thrust, which, in turn, will help real

subscriber growth.

This will indirectly assist telecom companies, as the

increase in rural disposable income could result in more

demand for mobile services.

Announcement Impact

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Announcement Impact

Infrastructure Positive

Issuance of tax-free bonds for financing infrastructure

projects has been doubled to `60,000cr in FY2012-13

from `30,000cr in FY2011-12. NHAI, IRFC, IIFCL and

the power sector will issue bonds worth `10,000cr each,

whereas HUDCO, National Housing Bank, SIDBI and the

ports sector would issue bonds worth `5,000cr.

Target to award 8,800km of road projects in FY2012-13

set for NHAI (against target of 7,300km in FY2011-12).

Further, allocation to National Highway Development

Programme (NHDP) increased by 14% yoy to`25,360cr.

To encourage public private partnerships in road

construction projects, Union Budget has proposed to allow

ECB for capital expenditure on the maintenance and

operations of toll systems for roads and highways, given

they are part of the original project.

Rate of withholding tax on interest payments on external

commercial borrowings is proposed to be reduced from

20% to 5% for three years for infrastructure sectors likepower, road and bridges, housing and ports.

Allocation for Accelerated Irrigation Benefit Programme

(AIBP) in FY2012-13 is being stepped up by 13% to

`14,242cr.

Various infrastructure sectors such as irrigation and oil

and gas have been made eligible for viability gap funding.

Positive for all E&C players as it would boost infrastructure

development in railway, ports, housing and highways by

facilitating fund raising for various government bodies

that award infrastructure projects.

Positive for all road developers (IRB, ITNL and Ashoka

Buildcon) as increased target of project awarding and

higher allocation would provide more opportunities on

the order inflow front for road players.

Positive for all road developers (IRB, ITNL and Ashoka

Buildcon).

Would help reduce the borrowing cost of funds and,

hence, would help fuel infrastructure projects with

low-cost funds.

Positive for E&C companies such as IVRCL, NCC,

Madhucon Projects and Patel Engineering, as it would

create more opportunities in the irrigation segment.

Would help in attracting private investment in PPP projects.

Positive for all E&C players present in the irrigation space.

To ease access of credit to infrastructure projects, India Infrastructure Finance Company Limited (IIFCL) has put in place a structure

for credit enhancement and takeout finance. A consortium for direct lending and grant of in-principle approval to developers before

the submission of bids for PPP projects has also been created.


(((((`````))))) (((((`````))))) FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013EL&T Buy 1,320 1,607 63.5 70.7 20.8 18.7 13.7 12.4

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Real Estate Neutral

Allowed to raise money through ECBs and reduce

withholding tax on interest payments on ECBs from 20%

to 5% for three years for affordable housing.

Extension of 1% interest subvention on housing loans on

loan amount up to`15lakhs, where the cost of the house

does not exceed`25lakhs.

This should benefit developers who plan to raise money

through ECBs for the construction of affordable houses,

as it would lower the borrowing cost.

This would continue to benefit developers having

low-cost affordable housing projects.

Announcement Impact

Measures announced in this budget were more in favor of boosting affordable housing projects in Tier II and III cities by extending

interest subvention and allowing to raise money through ECBs. Since most of the listed companies do not have any exposure to the

affordable housing segment, the budget is Neutral for the real estate sector.

CompanyCompanyCompanyCompanyCompany RecoRecoRecoRecoReco CMPCMPCMPCMPCMP TTTTTarget Parget Parget Parget Parget Pricericericericerice EPS (EPS (EPS (EPS (EPS (`````))))) P/E (x)P/E (x)P/E (x)P/E (x)P/E (x) EV/EBITDEV/EBITDEV/EBITDEV/EBITDEV/EBITDA (x)A (x)A (x)A (x)A (x)(((((`````))))) (((((`````))))) FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E FY2012EFY2012EFY2012EFY2012EFY2012E FY2013EFY2013EFY2013EFY2013EFY2013E

Anant Raj Buy 59 78 5.4 8.4 11.0 7.0 11.4 8.3

Top Picks


Plan allocation for general education has been increased

by 17.6% to `49,240cr for FY2012-13 from `41,860cr

for FY2011-12.

Under Sarva Shiksha Abhiyan, `25,555cr has been

allocated, which is 21.7% higher than that allocated in

FY2011-12.

Various IT initiatives have been extended for the efficient

administration of various government departments.

UID Aadhar to get adequate funds for enrolment of

40cr people, in addition to the 20cr people already

enrolled.

Higher allocation to the education sector would boost

business opportunities for education companies.

This would provide growth opportunities in terms of ICT

and PPP in the K-12 and vocational segments to players

focusing on formal and vocational education, such as

Educomp, Everonn, Core Projects and NIIT Ltd.

Creation of strong opportunities for Indian software

companies in the e-Governance space in the domestic

market going forward.

Announcement Impact

IT Neutral



MindTree Buy 451 519 51.7 50.2 8.7 9.0 5.1 4.1

Mahindra Satyam Buy 70 87 8.5 8.0 8.2 8.6 6.0 4.6

Top Picks


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Union Budget 2012-13 was a mixed bag for the metals and mining sector. While the increase in excise duty would be marginally

negative for metal producers, exemption from import duty on coal would be slightly positive for thermal coal importers, including

non-ferrous metal producers, JSW Steel and some sponge iron producers. Moreover, the increase in customs duty on non-alloy

flat-rolled steel from 5.0% to 7.5% would be slightly positive for flat steel producers.

Metals Neutral

Increase in excise duty from the current level of

10% to 12%.

Full exemption from import duty on thermal coal (5%

currently) up to FY2014 and decrease in countervailing

duty from 5% to 1%.

Decrease in basic customs duty on machinery from 7.5%

currently to 2.5% for setting up iron ore beneficiation and

pellet plants.

Increase in customs duty on non-alloy flat-rolled steel from

5.0% to 7.5%.

Decrease in import duty on machinery used for

prospecting in mining from 10.0/7.5% to 2.5%; Abolition

of customs duty for coal mining projects.

This would be slightly negative for steel, sponge,

non-ferrous metal producers.

This would be positive for coal importers, such as Nalco,

Hindalco, Sterlite Industries and JSW Steel.

This would be slightly positive for steel makers setting up

pellet and beneficiation plants.

This would be slightly positive for flat steel producers,

such as Bhushan Steel, SAIL, JSW Steel and Tata Steel.

Positive for mining companies and steel companies

undertaking mining projects.

Announcement Impact



NMDC Buy 158 202 18.0 18.6 8.8 8.5 4.5 4.1

Tata Steel Buy 454 558 40.8 50.9 11.1 8.9 7.3 5.5Hind. Zinc Buy 130 149 13.0 15.2 10.0 8.5 6.3 4.6

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Reliance Industries Buy 773 923 64.2 64.7 12.0 11.9 6.7 6.8

ONGC Buy 273 316 30.2 30.2 9.1 9.0 3.9 3.6GAIL Buy 367 440 31.1 35.4 11.8 10.3 6.1 5.3

Top Picks

Increase in cess from the current level of`2,500/tonne to

`4,500/tonne.

`43,737cr of petroleum subsidies have been provided

for FY2013.

Customs duty on LNG import has been abolished from

the current level of 5%.

This would be negative for Indian crude oil producers

(mainly Cairn India and ONGC) as cess is deducted from

the realized crude price.

Would be insufficient if crude oil stays at current levels

(above US$115/bbl) or retail prices are not revised

upwards. Under recoveries are expected to amount to

~`130,000cr in FY2013. It could also mean higher

subsidy burden for upstream oil companies (ONGC and

Oil India).

This would be marginally positive for city gas distributors

such as Gujarat Gas.

Announcement Impact

Oil & Gas Negative


Union Budget 2012-13 is negative for the oil and gas sector. The budget pegged the government's share of petroleum subsidy at

only`43,737cr for FY2013, which would be insufficient if Brent crude stays at current levels (above US$115/bbl) or diesel and LPG

cylinder prices are not revised upwards. The government's share of subsidy for FY2012 is expected to be`68,533cr, which is in-line

with our expectation of `65,000cr, although it is significantly above the government's target of `23,696cr.

The budget proposes to increase cess for oil producers from`2,500/tonne to `4,500/tonne, which will be negative for Cairn India

and ONGC.

In light of this event, we lower Cairn India's FY2013 EPS estimate by 10.7% to`46.3. Thus, our target price stands reduced to`332

(previous target price `367). We recommend Neutral on the stock.

For ONGC, we lower our FY2013 EPS estimate by 10.3% to`30.2 and lower our target price to `316 (previous target price`324).

However, we note that any increase in prices of diesel and LPG will lower its share of subsidy burden and as such it will be positive

for ONGC. We maintain our Buy view on the stock.

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Pharmaceutical Positive



Lupin Buy 504 593 22.3 29.7 22.5 17.0 18.8 14.1

Cadila Healthcare Buy 712 866 33.5 43.3 20.1 15.6 16.4 13.3Aurobindo Pharma Buy 113 166 11.8 13.8 9.6 8.2 7.3 6.5

Top Picks

Proposal to extend weighted deduction of 200% for R&D

expenditure in an in-house facility for a further period of

five years beyond March 31, 2012.

Allocation for NRHM proposed to be increased from

`18,115cr in FY2011-12 to `20,822cr in FY2012-13.

Proposal to continue to allow repatriation of dividends

from foreign subsidiaries of Indian companies at a lower

tax rate of 15% up to March 2013.

Introduced MAT on partnership firm.

Positive for all Indian pharmaceutical companies.

Positive for all pharmaceutical companies.

Positive for all pharmaceutical companies, mainly Indian

companies, as they generate the highest revenue from

export markets.

Would negatively impact Cadila Healthcare and Sun

Pharmaceuticals. Since we have already factored in higher

tax provision for FY2013, we are not changing our

FY2013 estimates for both the companies.

Announcement Impact


Union Budget 2012-13, as expected, is positive for the pharmaceutical sector. As expected, R&D sops would continue to be positive

for the sector as a whole.

The government has again increased budgetary allocation for healthcare spending, which would be an overall positive for the

sector. Indian pharmaceutical companies have been investing on the R&D front to tap opportunities in the domestic and global

markets. To encourage the same, the weighted deduction on R&D expenditure to 200% (in-house research) was extended for a

further period of five years.

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NTPC Buy 173 199 11.6 12.7 14.9 13.6 11.0 10.4GIPCL Buy 69 93 8.5 10.5 8.1 6.6 4.7 3.9

Top Picks

Waiver of basic custom duty on coal

Extension of tax exemption under 80-IA for power

generation companies until FY2013.

Waiver of basic custom duty on coal is a substantial

positive for many private sector power generators, such

as Adani Power and JSW Energy, who rely on imported

coal for running their plants.

As per Section 80-IA exemptions, power plants are eligible

for a tax holiday of 10 years from the year of

commissioning of the plants. The exemption under this

section was applicable to power plants commencing

operations before FY2012 and has now been extended

until FY2013. However, companies have to pay tax under

MAT provisions. Extension of 80-IA benefits would have

a positive impact on private sector power generation

companies. Some of the companies, which would majorly

benefit include Adani Power and Tata Power.

Announcement Impact


Power Positive

Some other positive announcements for the power sector include tax-free bonds worth`10,000cr for financing the power sector,

allowing ECBs to part finance rupee debts of existing power projects and reduction of withholding tax on interest payments on ECBs

from 20% to 5%. In all, the budget is expected to have a positive impact on the power sector.

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Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Ratings (Returns) :

Disclaimer

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment

decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are

those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading

volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources

believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for

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Note: Please refer to the importantNote: Please refer to the importantNote: Please refer to the importantNote: Please refer to the importantNote: Please refer to the important Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to theStock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the

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6th Floor, Ackruti Star, Central Road, MIDC, Andheri (E), Mumbai - 400 093. Tel: (022) 39357800

Research Team

Fundamental:

Sarabjit Kour Nangra VP-Research, Pharmaceutical [email protected]

Vaibhav Agrawal VP-Research, Banking [email protected]

Bhavesh Chauhan Metals & Mining [email protected]

Sharan Lillaney Mid-cap [email protected]

V Srinivasan Research Associate (Cement, Power) [email protected]

Yaresh Kothari Research Associate (Automobile) [email protected]

Nitin Arora Research Associate (Infra, Real Estate) [email protected]

Ankita Somani Research Associate (IT, Telecom) [email protected]

Varun Varma Research Associate (Banking) [email protected]

Saurabh Taparia Research Associate (Cement, Power) [email protected]

Technicals:

Shardul Kulkarni Sr. Technical Analyst [email protected]

Sameet Chavan Technical Analyst [email protected]

Sacchitanand Uttekar Technical Analyst [email protected]

Derivatives:

Siddarth Bhamre Head - Derivatives [email protected]

Institutional Sales Team:

Mayuresh Joshi VP - Institutional Sales [email protected]

Hiten Sampat Sr. A.V.P- Institution sales [email protected]

Meenakshi Chavan Dealer [email protected]

Gaurang Tisani Dealer [email protected]

Akshay Shah Sr. Executive [email protected]

Production Team:

Simran Kaur Research Editor [email protected]

Dilip Patel Production [email protected]

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