Retail Research 1st February, 2023

Union Budget 2023-24:

What does it have for you?
Our expert Research team decodes it for you!

Focus on infra, inclusive Encouraging taxpayers towards Outlay for NHAI increased
development & new tax regime by reducing by 21% to Rs 1.62 trillion
green energy arbitrage between old and for FY24
new tax regime

SBI Securities Union Budget FY 2023-24 1

The key takeaways

Well balanced budget with focus on (1) Economic growth with significant increase in capital
expenditure for infrastructure & credit availability for agriculture and co-operative sector, (2) support
to start up entrepreneurs, (3) Sabka Saath Sabka Vikas by focusing on lower strata of society, including
youth and women, through various flagship schemes thereby ensuring basic last mile infrastructure,
education, food, shelter and employment (4) long term environment friendly (GREEN) growth
strategy, (5) Digitalisation and (6) Ease of doing business
Overall, Union Budget 2023-24 has set the stage for Indian economy to march towards another year of
world’s leading GDP growth in CY23/FY24. Nominal GDP growth of 10-12% in FY24E is likely to drive
earnings growth in medium to long term for corporate sector.
Positive takeaways
 “Walk the Talk” on Fiscal Prudence: FY23E fiscal deficit is likely to be at 6.4% of GDP, thereby adhering to
the budget estimates. For FY24, fiscal deficit is estimated to be at 5.9% of GDP, to be funded by net market
borrowing of Rs 12.3 trillion (up 6% YoY). Finance Minister has reiterated its earlier intention to bring fiscal
deficit below 4.5% of GDP by FY26. The stable macro policy is appreciated by global investors and augurs
well for the economy in the long run.
 Significant increase in allocation for capex towards infrastructure: Few key notable measures are (a)
Outlay for capital expenditure has stepped up for 3rd year in a row by healthy 33% YoY to
Rs 10 trillion in FY24E. The allocation is ~4x of the allocation of Rs 2.5 trillion in FY16 (b) continuation of 50-
year interest free loan to state governments for 1 more year to incentivize infrastructure investment and
(c) focus on 100 transport infrastructure projects for end-to-end connectivity for ports, coal, steel and
fertilizer sectors. Spending on infrastructure will have multiplier effect on growth and job creation.
 Highest ever outlay for Railways and decent increase for Defence sector: Government has earmarked
capital outlay of Rs 2.4 trillion for Railways – Highest ever in the history. In long term, this will increase
transit speed for goods and people and enhance connectivity, thereby ensuring lower logistic cost in the
economy. For defence, capital outlay increased by 12% YoY to Rs 4.3 trillion
 Healthy increase in outlay on Roads, Water and Housing flagship schemes: Outlay for (a) NHAI has
increased by 21% YoY to Rs 1,62,207 cr (b) Jal Jeevan Mission (JJM)/National Rural Drinking Water Mission
increased by 16% YoY to Rs 70,000 cr (v/s BE) (c) Pradhan Mantri Awas Yojna (PMAY) increased by 66% YoY
to Rs 79,590 cr (v/s BE).
 Big focus on Farm sector: (a) Agriculture credit target increased by 11% YoY to Rs 20 trillion with focus on
animal husbandry, dairy and fisheries sector. (b) Agriculture Accelerator Fund will be set-up to encourage
agri startups by young entrepreneurs in rural areas. (c) Fertiliser subsidy reduced by 22% YoY to Rs 1,75,100
cr (likely due to correction in input and finished goods prices).
 Personal income tax – New tax regime made more lucrative and status quo on capital gains tax: New tax
regime made more lucrative by increasing basic exemption limit to Rs 3 lakh and reducing tax slabs from 6
to 5 coupled with introduction of standard deduction under the new tax regime; No tinkering with capital
gains tax.

Outlay for capital expenditure On track of fiscal consolidation - Focus on farm sector with
has stepped up for 3rd year in Fiscal deficit is estimated to be 11% YoY increase in credit
a row by healthy 33% YoY to at 5.9% of GDP for FY24E target to Rs 20 trillion
Rs 10 trillion in 2022-23. The
allocation is ~4x of the allocation
of Rs 2.5 trillion in FY16

SBI Securities Union Budget FY 2023-24 2

Budget at a glance

2021-22 2022-23 2022-23 2023-24

Particulars (Rs in Crore)
Actuals Budget Estimates Revised Estimates Budget Estimates

1 Revenue Receipts 21,69,905 22,04,422 23,48,413 26,32,281

Growth 8.2% 12.1%

2. Tax Revenue (Net to Centre) 18,04,793 19,34,771 20,86,662 23,30,631

3. Non-tax Revenue 3,65,112 2,69,651 2,61,751 3,01,650

4 Capital Receipts 16,23,896 17,40,487 18,38,819 18,70,816

Growth 13.2% 1.7%

5. Recovery of Loans 24,737 14,291 23,500 23,000

6. Other Receipts 14,638 65,000 60,000 61,000

7. Borrowings & Other Liabilities 15,84,521 16,61,196 17,55,319 17,86,816

8 Total Receipts (1+4) 37,93,801 39,44,909 41,87,232 45,03,097

9 Total Expenditure (10+13) 37,93,801 39,44,909 41,87,232 45,03,097

10. On revenue account of which 32,00,926 31,94,663 34,58,959 35,02,136

11. Interest Payments 8,05,499 9,40,651 9,40,651 10,79,971

12. Grants in Aid for creation of

2,42,646 3,17,643 3,25,588 3,69,988
capital assets

13. On Capital Account 5,92,874 7,50,246 7,28,274 10,00,961

14 Effective Capital Expenditure (12+13) 8,35,520 10,67,889 10,53,862 13,70,949

15 Revenue Deficit (10-1) 10,31,021 9,90,241 11,10,546 8,69,855

As a % of GDP -4.4 -3.8 -4.1 -2.9

16 Effective Revenue Deficit (15-12) 7,88,375 6,72,598 7,84,958 4,99,867

As a % of GDP -3.3 -2.6 -2.9 -1.7

17 Fiscal Deficit [9-(1+5+6)] 15,84,521 16,61,196 17,55,319 17,86,816

As a % of GDP -6.7 -6.4 -6.4 -5.9

18 Primary Deficit (17-11) 7,79,022 7,20,545 8,14,668 7,06,845

As a % of GDP -3.3 -2.8 -3 -2.3

Source: Ministry of Finance

Notes:
(i) Nominal GDP for BE 2023-24 has been projected at Rs 3,01,75,065 crore assuming 10.5% growth over the estimated Nominal GDP of
Rs 2,73,07,751 crore as per the First Advance Estimates of FY 2022-23
(ii) Individual items in this document may not sum up to the totals due to rounding off.

SBI Securities Union Budget FY 2023-24 3

Our Top Picks

Rail Vikas Nigam Ltd. | CMP: ` 72.7 | Target: ` 91.0 | Upside: 25%

Rail Vikas Nigam Ltd (RVNL) is a leading rail PSE which undertakes and executes projects related to rail infrastructure. The
Company as of Sep’22 has an outstanding order book of Rs 55,000 cr which is 4.1x of its TTM Sep’22 consolidated sales and
thus offers healthy revenue visibility in the medium to long term. The budgetary proposals for infrastructure of Rs 10 trillion
capex outlay and Rs 2.4 trillion towards Railway budget are positive for the company in medium to long term.

KPIT Technologies Ltd. | CMP: ` 742.6 | Target: ` 891.0 | Upside: 20%

KPIT Technologies Ltd is a leading software development and integration partner to global automotive companies. During
3QFY23, revenue was up 23.13% QoQ to Rs 917.12 crore. Net profit was up 20.38% QoQ at Rs 100.49 crore. The Company is
on track to beat its FY23 guidance given the robust deal pipeline. TCV of deal wins was $ 272 million during the quarter. The
budgetary proposal is supportive for the growth of the Automobile and IT sector.

ITC Ltd. | CMP: ` 362.0 | Target: ` 416.0 | Upside: 15%

NCCD duty rate revised upwards by ~16% w.e.f 2nd Feb23, which will lead to effective price increase to the tune of ~2%
against the budget expectation of 10-12% hike. Moderate increase in tax rate will not dent the demand environment for
cigarettes business, which is one of the cash cow for ITC. ITC is trading at relatively cheaper valuations as compared to its
peers and has a healthy consistent dividend payout ratio.

Indian Hotels Co. Ltd. | CMP: ` 326.7 | Target: ` 380.0 | Upside: 16%

Indian Hotels Co. Ltd is one of the largest hotel companies in India and operates its hotels under brands such as Taj, Vivanta,
Seleqtions and Ginger. In 3QFY23, the company reported its highest-ever consolidated revenue of Rs 1,686 cr up 52% YoY.
The government has taken up promotion of tourism on mission mode, with active participation of states, convergence of
government programmes and public-private partnerships. This augurs well for hotel companies like Indian Hotels Co Ltd in
medium to long term.

Mahindra & Mahindra Ltd. | CMP: ` 1,352.1 | Target: ` 1,568.0 | Upside: 16%

Mahindra & Mahindra Ltd is one of the most diversified automobile companies in India with presence across 2-wheelers, 3-
wheelers, PVs, CVs, tractors & earthmovers. The company has an order book of ~2,60,000 units as of Sep’22. New products,
capacity expansion and its venture into EV segment augurs well to capture revenue growth opportunities emanating from the
budgetary proposals in green energy and agriculture space. Also, no duty was raised on utility vehicle as earlier feared which
is positive for the company.

UltraTech Cement Ltd. | CMP: ` 7,141.4 | Target: ` 8,212.0 | Upside: 15%

UltraTech Cement Ltd is the largest manufacturer of grey cement, ready mix concrete (RMC) and white cement in India and
third largest globally excluding China. The company has a capacity of 121.4 MTPA of grey cement at present and the company
has approved capex of Rs 12,886 cr towards increasing its grey cement capacity by 22.6 MTPA with a mix of brown field and
green field expansion across the country. The company’s current expansion plans bodes well to capture demand from the
budget’s enhanced outlay for affordable housing and capital investment to the tune of Rs 79,000 cr and Rs 10 trillion
respectively.

SBI Securities Union Budget FY 2023-24 4

Budget and Impact

Agriculture & Allied

Budget Proposals Key beneficiaries

 Agriculture credit enhanced to Rs 20 trillion for the year 2023-24 • FMCG: Nestle, HUL, Dabur
 PM Matsya Sampada Yojana with a targeted investment of Rs 6,000 crore • Auto: Maruti, M&M and
 Atmanirbhar Clean Plant Program to boost the availability of disease-free, quality Ashok Leyland
planting material for high-value horticultural crops at an outlay of Rs 2,200 cr • Fertilizers and Chemicals:
 To supply free food grain under PM Garib Kalyan Anna Yojana (PMGKAY) for an Dhanuka Agritech,
outlay of Rs 2 trillion PI Industries, Coromandel,
Sumitomo, UPL
 Reduced duty on key inputs for boosting domestic manufacturing of shrimp
feeds • Consumer Durable:
Blue Star, Polycab,
CG Consumer Products
Impact • Animal feed: Avanti Feeds

 It will help to drive rural credit demand including micro credit

 Higher farm income as prices of agriculture produced to remain stable
 Will help increase the sale of fertilizers and agrochemicals
 Consumer discretionary like Auto and White goods demand may gain further
traction

Infrastructure, Railways & Logistics

Budget Proposals Key beneficiaries

 Capital investment outlay increased steeply by 33% YoY to Rs 10 trillion (3.3% of
GDP). • Capital goods:
Cummins India Ltd,
 The Effective Capital Expenditure of the Centre is budgeted at Rs 13.7 trillion Larsen & Toubro Ltd,
(4.5% of GDP). KEC International Ltd,
 A capital outlay of Rs 2.4 trillion has been provided for the Railways. Siemens, ABB India, Action
 100 critical transport infrastructure projects for last and first-mile connectivity Constructoion
for Ports, Coal, Steel, fertilizer, and food grains sectors have been identified. • EPC Players: NCC, PNC Infra,
They will be taken up on priority with an investment of Rs 75,000 crore including RITES, RVNL, Ircon
Rs 15,000 crore from private sources. International,
• Logistics: Container Corp,
Gateway Distriparks
Impact
 Likely to benefit infrastructure EPC companies
 Improve connectivity
 Will create demand for capital goods

SBI Securities Union Budget FY 2023-24 5

Budget and Impact

Housing

Budget Proposals Key beneficiaries

 The outlay for PM Awas Yojana is being enhanced by 66% YoY to over • Real Estate: Oberoi Realty,
Rs 79,000 cr. Prestige Estate, Macrotech
 Changes in new tax regime – increased basic tax exemption limit to Rs 3 lakh; Developers, Sobha, Brigade
increased rebate limit to Rs 7 lakh; reduced number of slabs from 6 to 5 Enterprises
 To set-up Urban Infrastructure Development Fund (UIDF) and allocate • Cement: UltraTech,
Rs 10,000 cr per annum under UIDF. JK Cement, Sagar Cement
 To cap deduction from capital gains on investment in residential house under • Building products: HIL,
sections 54 and 54F to Rs 10 cr – Negative for premium properties Kajaria Ceramics, Century
Plyboard
• Metals & Pipes: Tata Steel,
Supreme Industries, Prince
Impact Pipes, Finolex Pipes

 Boost the housing demand

 Boost to ancillary real estate products such as plywood, ceramics, cement roofs,
etc

Defence

Budget Proposals Key beneficiaries

 Increased allocation to defence budget to Rs 5.94 trillion for FY24 vs. Rs 5.25 • PSU Defence Companies:
trillion for FY23 Bharat Electronics,
 Rs 1.62 trillion for capital expenditure including purchasing new weapons, Hindustan Aeronautics,
aircraft, warships, and other military hardware Mazagon Dock, Cochin
Shipyard
• Private Defence Companies:
Bharat Forge,
Impact Solar Industries,
PTC Industries Ltd,
 Will help in boosting the defence modernization Paras Defence, Data
 Create a defence offset opportunity Patterns
 Will help in further ramping-up defence orders

SBI Securities Union Budget FY 2023-24 6

Budget and Impact

Green Energy & Auto

Budget Proposals Key beneficiaries

 Net-zero carbon emission by 2070
• Green Energy Companies:
 Target to reach an annual production of Green Hydrogen of 5 MMT by 2030 Linde India, MTAR Tech,
 Rs 35,000 cr for priority capital investments towards energy transition Borosil Renewable,
 Rs 20,700 cr towards evacuation and grid integration of 13 GW renewable energy KPI Green Energy
from Ladakh • Auto Stocks:
 Adequate funds to scrap old vehicles of the Central Government and support for Ashok Leyland, Maruti,
states. Tata Motors, M&M, Olectra,
 Exemption of customs duty up to 31st March, 2024 on import of capital goods JBM Auto
and machinery required for manufacturing of lithium ion cells for batteries used • Cable & Transformers: Apar
in electric vehicles Ind, KEI Industries, CG
 Budget for FAME increased by 78% YoY to Rs 5,172 cr Power, Voltamp

Impact
 Reduce dependence on fossil fuel
 Will create demand for newer vehicles
 Higher demand for solar panels, wind turbines and other equipment used in green
energy

Pharmaceutical, Healthcare & Chemicals

Budget Proposals
Key beneficiaries
 Health expenditure budget of Rs 88,956 cr (2.1% of GDP)
 A new programme to promote research and innovation in pharmaceuticals. • Tarsons Product,
 Reduced basic customs duty on acid grade fluorspar from 5% to 2.5% to support Borosil Ltd,
domestic fluorochemicals industry Sun Pharmaceutical Ltd,
Syngene International,
Suven Lifesciences Ltd
Impact • Chemicals: SRF, Navin
Fluorine, Gujarat
 To encourage the industry to invest in research and development in specific Fluorochemicals
priority areas
 Benefit research-driven pharmaceutical companies and equipment providers to
research labs
 To make fluorochemicals industry more competitive

SBI Securities Union Budget FY 2023-24 7

Budget and Impact

Financial Sector

Budget Proposals Key beneficiaries

• NBFCs:
 To spend Rs 45 trillion in FY24. Gross borrowings are projected at Rs 15.4 trillion Shriram Finance Ltd,
 Rs 9,000 cr allocation for revamped MSME credit scheme to be applicable from L&T Finance Holdings,
1st April 2023 Cholamandalam Finance
 To simplify, ease and reduce the cost of compliance. Financial sector regulators • Banks: ICICI Bank, Kotak
to review existing regulations Mahindra Bank, Bank of
 The entire fifty-year loan to states has to be spent on capital expenditure within Baroda
2023-24.
 Income from insurance policies with aggregate premium of more than Rs 5 lakh
(other than ULIP) is taxable from 1st April 2023 for new policies Negative for
 It is proposed to tax distributed income by business trusts in the hands of a unit
holder (other than dividend, interest or rent which is already taxable) on which • Life Insurance companies
tax is currently avoided both in the hands of unit holder as well as in the hands of like HDFC Life, Max Life, etc
business trust • Marginally negative for
REITs and InviT

Impact
 The proposals will help keep aggregate demand higher
 Will help to boost infrastructure spending including urban infrastructure
 Revamped credit guarantee scheme to create collateral-free credit of Rs 2 trillion
for MSME. NBFCs to be key beneficiaries
 Banks can source sticky deposits from Senior Citizens

Currency movement:
India’s 10-year government bond yield fell sharply to 7.28% from an intraday high of 7.39% on the day of the Union
Budget, while the rupee gained slightly to close at Rs 81.68 against the dollar. Bond yield has cooled off on the
back of a moderate increase in FY24 target market borrowings by the government of India. USDINR depreciated to
the level of 82 due to heavy selling by FIIs. However, the depreciation in the rupee has been partially arrested due
to the weaker Dollar index. The dollar index is exhibiting weakness ahead of the US Federal Reserve meeting
(scheduled on the 1st Feb 23 evening), where the pace of rate hike is expected to be moderated to 25 bps.

SBI Securities Union Budget FY 2023-24 8

The key highlights

Direct Tax proposal

Benefits in personal income tax under new regime:
i. Income limit for rebate of income tax increased from Rs 5 lakh to Rs 7 lakh in the new regime.
ii. Basic exemption limit increased from Rs 2.5 lakh to Rs 3.0 lakh with number of slabs reduced to 5 from 6. The
new tax slab is changed as follows:
Up to Rs 3 lakh – Nil
Rs 3-6 lakh – 5%
Rs 6-9 lakh – 10%
Rs 9-12 lakh – 15%
Rs 12-15 lakh – 20%
Above Rs 15 lakh – 30%
iii. Highest surcharge rate on income above Rs 5 cr to be reduced from 37% to 25% under new regime.
iv. Benefit of standard deduction for salaried class and pensioners is now extended to new tax regime as well.

Reduced TDS on taxable portion of EPF withdrawal for non-PAN cases:

Reduced TDS rate from 30% to 20% on taxable portion of EPF withdrawal in non-PAN cases.

Increase in leave encashment limit on retirement for private employees:

The tax exemption limit is increased from Rs 3 lakh to Rs 25 lakh on leave encashment on retirement for non-
government salaried employees.

Enhanced limit for presumptive taxation for MSMEs (sec. 44AD) and professionals (sec. 4ADA):
Enhanced limits for micro enterprises and professionals to avail benefits of presumptive taxation from earlier
turnover of up to Rs 2 cr to Rs 3 cr in case of MSMEs and from turnover of up to Rs 50 lakh to Rs 75 lakh in case of
certain professionals.

Tax benefits for co-operative societies:

The benefit of 15% corporate tax is now extended to new co-operatives commencing manufacturing till 31st March,
2024. Also, higher limit of Rs 3 cr for TDS on cash withdrawal for co-operative societies.

Tax benefits for startups:

Extended the date of incorporation by 1 year for income tax benefits to startups. Also, extended benefit of carry
forward of losses from 7 years of incorporation to 10 years in case of change in shareholders.

SBI Securities Union Budget FY 2023-24 9

The key highlights

Indirect Tax proposal

Green Mobility:
Exemption of excise duty on GST-paid compressed bio gas contained in blended compressed natural gas. Further,
exemption of customs duty up to 31st March, 2024 on import of capital goods and machinery required for
manufacturing of lithium ion cells for batteries used in electric vehicles >> To avoid cascading effect of taxes on
blended compressed natural gas and boost green mobility

Electronics:
Relief in customs duty from 2.5% to Nil on import of certain parts and inputs like camera lens for manufacturing of
mobile phones and continuation of concessional duty on lithium ion cells for batteries for another 1 year. For TV
manufacturers, reduced basic customs duty from 5.0% to 2.5% on parts of open cells of TV panels. The basic
customs duty on electric kitchen chimney is increased from 7.5% to 15% while the basic customs duty on heat coils
used in the manufacturing is reduced from 20% to 15% >> To promote value addition in manufacture of mobile
phones and TVs

Chemicals & Petrochemicals:

Exemption of basic customs duty on denatured ethyl alcohol used in the chemical industry. Reduced basic customs
duty on acid grade fluorspar from 5% to 2.5% to support domestic fluorochemicals industry. Reduced basic customs
duty on crude glycerin used in the production of epicholorhydrin from 7.5% to 2.5% >> To support ethanol blending
programme, and make chemical industry more competitive

Marine products:
Reduced duty on key inputs for boosting domestic manufacturing of shrimp feeds >> To enhance export
competitiveness of marine products, especially shrimps

Lab grown diamonds:

Relief in basic customs duty from 5% to Nil on seeds used for manufacturing lab grown diamonds >> To promote
export of lab grown diamonds

Metals:
Continued exemption from basic customs duty on raw materials for manufacture of CRGO steel, ferrous scrap and
nickel cathode. Concessional basic customs duty of 2.5% to continue on copper scrap >> To augment raw material
availability for MSMEs

Compounded rubber:
Increased basic customs duty on compounded rubber from 10% to 25% or Rs 30 per kg, whichever is lower >> To
bring compounded rubber at par with natural rubber and to curb duty circumvention

Cigarettes:
National Calamity Contingent Duty (NCCD) revised upwards by ~16% on specified cigarettes

SBI Securities Union Budget FY 2023-24 10

Disclosures & Disclaimers

SBICAP Securities Limited

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SBI Securities Union Budget FY 2023-24 11

Disclosures & Disclaimers

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