Budget Special

February 01, 2023

Capex push to sustain growth momentum

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 Budget Special
Union Budget Review (2023-2024)
Capex push to sustain growth momentum
Union Budget 2023-24 continues to underline the government’s commitment to support the ongoing economic recovery
with robust budgetary allocations towards capital expenditure and a focus on reviving the rural economy. The government
continued to avoid the pitfalls and kept a balanced approach between growth and fiscal prudence. Further, choosing the
economic growth agenda without being excessively populist ahead of the general elections next year essentially bodes well
from the capital market’s perspective. Additionally, the Budget continued to target unleashing animal spirits in the private
sector to ensure a multi-year economic upcycle and job creation.
Sustaining investment cycle high on agenda: Quality of investment also bodes well
A healthy 33% increase in the capital expenditure target to Rs. 10 trillion or Rs. 10 lakh crore (3.3% of GDP, almost double vis-à-
vis FY19 capex as percentage of GDP) clearly reflected the government’s priority to sustain investment cycle. More importantly,
the capex/revenue expenditure at 28.6% is more than double of 14% in FY2018 and highlights the improving trend in quality of
expenditure. Additionally, creation of the Urban Infrastructure Development Fund (UIDF) in line with RIDF with annual allocation
of Rs. 10,000 crore and increased allocation towards priority sectors including green energy is likely to accelerate infrastructure
development and thereby sustained economic momentum.
Boost to rural & manufacturing sectors including MSMEs
Considering broad-based economic development, the government ensured equal focus (without being excessively populist)
towards the ailing rural economy and MSMEs. Introduction of the Agricultural Accelerator Fund mainly to enhance productivity
and agri start-ups, enhancement of agri credit target to Rs. 20 trillion (up 11%) and a Rs 9,000 crore allocation for Credit Guarantee
Scheme for MSMEs for additional collateral free credit of Rs. 2 trillion are likely to offer the needed impetus.
Additionally, the Budget also emphasized upon manufacturing including green mobility, electronics, electricals, chemicals,
petrochemicals, among others by way by announcing necessary measures in custom duty. This was intended to promote exports
and boost productivity.
Fiscal consolidation through tightening of revenue expenditure
Higher-than-expected revenue helped the government meet its fiscal deficit target comfortably at 6.4% and with a 5.9% target
for FY24E, it is progressing well to meet its earlier guidance of 4.5% by FY26E. In our view, the projected growth of 10.4% in
gross revenue for FY24 looks reasonable and is in line with the nominal growth in GDP. However, the projections to limit total
expenditure to 7.5% (and just 2-2.5% net of subsidy & interest outgo) is quite intriguing to us. The government seems to be betting
on better than projected revenue buoyancy in FY2024 too. The bond market seems to believe in the fiscal math and the 10-year
bond yield softened today on the back of lower-than-expected gross and net government borrowing of Rs. 15.4 trillion and Rs.
11.8 trillion.
Key market overhang goes away with status quo on LTCG
Unlike consensus estimates especially on the uniformity of LTCG tenure, the government abstained from doing any changes in
Long Term Capital Gain Tax, which offered a sigh of relief to the market. This along with the government’s commitment to drive
sustained economic activity may restore confidence among investors across categories.
Market: Focus back to corporate earnings growth
Budget 2023-24, in our view, has all the necessary elements to sustain the ongoing corporate earnings rebound in subsequent
periods. An increase in quality expenditures like capital expenditures and promoting manufacturing activities with a necessary
focus towards rural economy, we believe Indian economy should continue to outperform other economy as forecasted by global
agencies. This should also translate into better corporate earnings growth. Budget 2023-24 indeed cemented out 3-C investment
approach (Credit, Capex and Consumption) for 2023 viz; BFSI, automobile, consumers, building materials, etc.
Though the Union Budget has more hits than misses, the celebrations have been overshadowed by the turbulence in Adani group
companies. Past experience shows that such issues can dampen the spirits for a short period of time but eventually the market
stabilises and fundamentals come to fore. In hindsight, event-driven volatility in the market has turned out to be an opportunity
for investors.
Investment Picks:
Large-Caps: Reliance Industries, HDFC Bank, SBI, M&M, UltraTech, Infosys, Titan, ITC SRF, L&T
Mid-caps & Small-caps: Trent, Indian Hotels, Greaves Cotton, Polycab India, PNC Infratech, Coforge, Cummins

Budget summary (Rs ‘00 crore)

Particulars FY17 FY18 FY19 FY20 FY21 FY22 FY23RE FY24BE
Gross tax revenues 17,158 19,190 20,805 20,101 20,271 27,093 30,431 33,609
% change yoy 17.9% 11.8% 8.4% -3.4% 0.8% 33.7% 12.3% 10.4%
Net tax revenues 11,014 12,425 13,172 13,569 14,263 18,048 20,867 23,306
% change yoy 16.8% 12.8% 6.0% 3.0% 5.1% 26.5% 15.6% 11.7%
Non tax revenues 2,728 1,927 2,357 3,272 2,076 6,255 5,857 6,406
Total expenditure 19,752 21,420 23,151 26,863 35,098 37,938 41,872 45,031
% change yoy 10.3% 8.4% 8.1% 16.0% 30.7% 8.1% 10.4% 7.5%
Fiscal deficit 5,356 5,911 6,494 9,337 18,183 15,845 17,553 17,868
as % of GDP 3.5 3.5 3.4 4.6 9.2 6.8 6.4 5.9
Revenue deficit 3,164 4,436 4,545 6,665 14,496 10,310 11,105 8,699
as % of GDP 2.1 2.6 2.4 3.3 7.3 4.4 4.1 2.9
Primary deficit 549 621 668 3,216 11,384 7,790 8,147 7,068
as % of GDP 0.4 0.4 0.3 1.6 5.8 3.4 3.0 2.3
Source: Budget documents, Sharekhan Research
February 01, 2023 2
 Budget Special
Budget Highlights 2023-24
Fiscal Math
• Revised fiscal deficit has been estimated at 6.4% of GDP for FY23 (largely in-line with budget estimate)
and that for FY24 is estimated at 5.9% of GDP.
• Fiscal consolidation path to remain intact; targeting fiscal deficit at 4.5% by FY26E.
• India’s GDP growth forecasted at 6.5% in FY24 versus 7% in FY23, the highest among all large economies
in the world. Nominal GDP growth pegged at 10.5% for FY24E.

Seven Pillars of Priorities-Saptarishi

• The finance minister outlined seven pillars - Inclusive development, Reaching the last mile, Infrastructure
& investment, Unleashing the potential, Green Growth, Youth power and financial sector in the budget
2023 aimed to address all sectors and sections of society.

Disinvestment & Privatisation

• The government has set a disinvestment target at Rs. 51,000 crores for FY24, lower than the previous
financial year. The estimates for FY23 have also been revised to Rs. 50,000 crores from the earlier target
of Rs. 65,000 crores.
• The government outlined plans to sell its shares in IDBI Bank, Shipping Corporation of India, BEML and
Container Corporation of India. It aims to invite financial bids for the stake sale in IDBI Bank, which will
spill over to FY24.

Infrastructure Development & Capital Expenditure

• A healthy 33% increase in capital expenditure target to Rs 10 trillion or Rs. 10 lakh crores (3.3% of GDP,
almost double vis-à-vis FY19 capex as percentage of GDP) clearly reflected government’s priority
to sustain investment cycle. Including state capital outlays and off-balance sheet spends, thus total
effective capital expenditure pegged at Rs13.7 lakh crore for FY24 vs Rs. 10.5 lakh crore in FY23RE.

Direct Tax
• New Tax regime: 1) No tax liability for income up to Rs. 7 lakhs. 2) Reduction in tax slabs from 5 to 6 under
the new tax regime. 3) Increase in standard deduction by Rs. 2,500 to Rs. 52,500 for salaried individuals
with an income of Rs. 15.5 lakhs and above under the new tax regime.
• Presumptive taxation benefit improved for MSMEs and professionals.
• The income from market linked debentures is proposed to be taxed as short-term capital gains at the
applicable rates.
• Income from life insurance policies with premium above Rs. 5 lakh is taxable provided the amount is not
received on the death of the person insured.
• Increase in taxation for REIT and InvIT unitholders.
• Increase in TCS rate for certain foreign remittances.

Indirect Tax
• The government has increased the tax rate on cigarette by marginal 2% after a gap of three years.
The increase was in the form of 16% increase in Natural Calamity Contingent Duty (NCCD) on certain
cigarettes.
• Basic customs duty on denatured ethyl alcohol reduced to nil from existing 5%.
• Reduction in basic customs duty on parts of open cells of TV panels to 2.5% from 5%. Duty of 2.5%.
reduced to nil on camera lens/ input parts for camera module of cellular mobile phone.
• The basic customs duty on electric kitchen chimney increased from 7.5% to 15%. Further, duty on heat
coils reduced from 20% to 15%.
• Customs duty on SKD vehicles increased from 30% to 35% and Custom duty on CBU vehicles increased
from 60% to 70%.
• Custom duty on machines for manufacturing Li ion cells is exempted till March 2024.
• BCD on acid-grade fluorspar cut to 2.5% from 5% and BCD on crude glycerin cut to 2.5% from 7.5%.

February 01, 2023 3

 Budget Special
Amendments made under Direct Tax
Š No tax liability for income up to Rs. 7 lakhs under new tax regime: Persons in the new tax regime
with income up to Rs. 7 lakhs will not have to pay any tax, which implies that the rebate limit has been
increased from Rs. 12,500 to Rs. 25,000 under the new regime.
Š Tax slabs reduced; standard deduction hiked in new tax regime: Tax slabs have been reduced to
5 from 6. As such the new tax rates are nil for Rs. 0-3 lakhs, 5% for Rs. 3-6 lakh, 10% for Rs. 6-9 lakh
and 15.0% between Rs. 9-12 lakh, 20.0% between Rs. 12-15 lakh and 30% above Rs. 15 lakh. Standard
deduction is increased by Rs. 2,500 to Rs. 52,500 for salaried individuals with an income of Rs. 15.5
lakh and above in the new tax regime.
Slab rates in new tax regime
New Regime Rate %
0-3 Lakhs Nil
3-6 Lakhs 10
6 -9 Lakhs 15
9-12 Lakhs 15
12-15 Lakhs 20
Above 15.0 Lakhs 30
Source: Budget documents, Sharekhan Research

Š Maximum tax rate slashed from 42.7% to 39%: Maximum tax rate has been reduced from 42.7% to
39.0% due to change in surcharge tax rate from 37% to 25% for income above Rs. 5 crore.
Š Increase in leave encashment exemption limit: Tax exemption on leave encashment on retirement
of non-government salaried employees has been increased to Rs. 25 lakh from Rs. 3 lakh, before.
Š Presumptive taxation benefit improved for MSMEs and professionals: Turnover limit for benefit of
presumptive taxation has been increased to Rs. 3 crore and Rs. 75 lakh for MSMEs and professionals,
respectively, whose cash receipts are not more than 5% of turnover. Earlier the limits were Rs. 2
crores and Rs. 50 lakhs for MSMEs and professionals, respectively.
Š Facilitating certain strategic disinvestments for banking company: The Budget 2023-24 proposes
to allow carry forward of accumulated losses and unabsorbed depreciation allowance in the case
of amalgamation of one or more banking company with any other banking institution or a company
subsequent to a strategic disinvestment if such amalgamation takes place within 5 years of strategic
disinvestment.
Š Rationalisation of taxes on market-linked debentures (MLDs): Income from market linked debentures
is proposed to be taxed as short-term capital gains at the applicable rates.
Š Taxability on income received from life insurance policies with premium above Rs. 5 lakhs: It is
proposed to provide that where aggregate of premium for life insurance policies (other than ULIPs)
issued on or after April 1, 2023 is above Rs 5 lakh, then the income from such policies is taxable
provided the amount is not received on the death of the person insured.
Š Increase in TCS rate for certain foreign remittances: TCS rate has been increased from 5% to 20%
for foreign remittances other than for educational and medical treatment under the LRS and purchase
of overseas tour programs.
Š Increase in taxation for REIT and InvIT unitholders: Income received from business trusts by manner
of ‘Repayment of debt’ to unitholders will be taxable w.e.f April 1, 2024. It was earlier exempted.

Source: Budget documents, Sharekhan Research

February 01, 2023 4

 Budget Special
Budget Beneficiaries
Sector Hits (á) / Misses (â)
Consumer goods & Discretionary (á)
Tax rate on cigarettes was marginally increased by 2% (á) ITC and other cigarette companies
Boost to consumer sentiments via providing tax benefits and allocations under (á) Hindustan Unilever, Dabur India and other
various rural schemes FMCG companies
Government increased focus on domestic tourism with launch of various (á) Indian Hotels Company, Lemon Tree Hotels,
programs Thomas Cook India and other companies
Banking (á)
MSMEs to receive additional Rs. 2 lakh crore collateral-free loans under credit (á) Banks
guarantee scheme
NBFCs (ßà)
Allocation increased to Rs. 79,590 crore for affordable housing under PMAY (á) HFCs
Income from market linked debentures is proposed to be taxed as short-term (â) NBFCs
capital gains
Insurance (â)
Income from insurance policies where the premium is over Rs. 5 lakh will not (â) Life Insurer
be exempt.
Building Materials (á)
Pradhan Mantri Awas Yojana (urban plus rural) outlay increased by 66%/3% to (á) Kajaria Ceramics, Century Plyboards,
Rs. 79,590 crore vis-à-vis FY23BE/FY23RE. Greenlam Industries, Supreme Industries, Astral,
APL Apollo
Allocation towards Smart Cities increased by 3%/5.4% to Rs. 6,800 crore vis-à-
vis FY22RE/FY22BE.
Jal Jeevan Mission outlay for FY2024 increased by 17%/27% versus FY23BE/ (á) Supreme Industries, Astral, Hi-tech pipes, APL
FYRE at Rs. 70,000 crore. Apollo
Cement (á)
Higher allocation to MoRTH (up by 35.8%), Pradhan Mantri Awaas Yojana (up (á) UltraTech, Shree Cements, Dalmia Bharat, JK
65.8%), Smart Cities (up 17.6%), AMRUT (up 9.6%) vis-à-vis FY23BE. Lakshmi Cement
Establishment of Urban Infrastructure Development Fund (UIDF) to create
urban infrastructure in Tier 2 and Tier 3 cities providing Rs. 10,000 crore per
annum.
Infrastructure (á)
Effective capital investment including state and off balance sheet has been (á) KNR Constructions, PNC Infratech, among
increased to Rs. 13.7 lakh crore from Rs. 10.5 lakh crore. Continuation of others
50-year interest free loan to state governments to incentivise infrastructure
investment with increased outlay of Rs. 1.3 lakh crore.
Outlay towards MoRTH has been increased by 36%/25% versus FY23BE/
FY23RE at Rs. 2,70,435 crore. Outlay towards NHAI has been increased by
21%/14% versus FY23BE/FY23RE at Rs. 1,62,207 crore.
Pradhan Mantri Gram Sadak Yojana outlay for FY2024 kept flat at Rs. 19,000
crore compared to FY23BE and FY23RE.
Jal Jeevan Mission outlay for FY2024 increased by 17%/27% versus FY23BE/
FYRE at Rs. 70,000 crore.
Real Estate (â)
Capping of deduction available from capital gains on investment in residential (â) DLF, Oberoi Realty
houses under sections 54 and 54F where the cost of new asset does not
exceed Rs. 10 crore.
The income received from business trusts by manner of ‘Repayment of debt’ to (â) Embassy Office Parks REIT, Mindspace
unitholders will be taxable w.e.f. April 1, 2024 which was earlier exempted. Business Parks REIT, Brookfield India REIT, IRB
InvIT, Powergrid InvIT

February 01, 2023 5

 Budget Special
Budget Beneficiaries
Sector Hits (á) / Misses (â)
Automobiles (á)
Increased custom duty on imported vehicles and exempted custom duty on (á) Maruti, M&M, Tata Motors, Exide and Amara
specific machineries required for manufacturing of lithium ion cells Raja
Capital goods (á)
Highest-ever capital outlay of Rs 2.41 lakh crore for railways (+71% y-o-y). (á) Cummins India, Siemens India
Outlay for metro projects at Rs 19,518 crore (+ 25% y-o-y).
In defence, Air Force had the least increase of 6% in allocation to Rs 57,137 (â) HAL, Bharat Dynamics
crore.
Reduction in customs duty on parts of open cells of TV panels to 2.5% from (á) Dixon Technologies
5%. Duty of 2.5% reduced to nil for camera module parts of mobile phones.
Oil & gas (á)
FY24 capital allocation of Rs. 30,000 crore for OMCs (á) IOCL, BPCL and HPCL
Priority capital investments of Rs. 35,000 crore towards energy transition (á) Reliance Industries
Power (á)
Viability Gap Funding support for Battery Energy Storage Systems (á) Power Grid
Green hydrogen production target of 5 mmt by 2030 (á) NTPC
Agri, fertilisers and chemicals (á)
FY23 fertiliser subsidy increased to Rs. 225,222 crore and budget support of (á) National Fertilisers Limited, RCF, Coromandel
Rs. 175,103 crore for FY24 International
Customs duty on acid grade fluorspar cut to 2.5% from 5% (á) SRF and Navin Fluorine
Metal & mining (á)
Infrastructure/Railway capex of Rs. 10 lakh crore/Rs. 2.4 lakh crore (á) Tata Steel. JSW Steel, JSPL, SAIL

Source: Budget documents, Sharekhan Research

February 01, 2023 6

 Budget Special
Sectoral analysis
Sector Key announcements Overall impact Key companies impacted
Budget impact: Positive
Sector view: Neutral (Preferred picks: ITC, Tata Consumer Products, Balrampur Chini Mills, Marico and HUL)
Increase in tax rate on cigarette by 2%: The Positive Positive for ITC and other cigarette
government has increased the tax rate on companies as the tax rate hike was
cigarette marginally by 2% after a gap of marginal at 2%, which was much lesser
three years through a 16% increase in Natural than expected increase in the range
Calamity Contingent Duty (NCCD) on certain of 5-10%. No major impact on ITC’s
cigarettes. cigarette sales volume.
Ethanol blending: Basic customs duty on Positive Positive for ethanol blending
denatured ethyl alcohol reduced to nil from 5% companies such Globus Spirits and
now. The chemical is used in ethanol blending sugar companies.
by companies.
Millets: To make India a global hub for 'Shree Positive Positive for companies such as
Consumer Goods Anna', the Indian Institute of Millet Research, Tata Consumer Products, Marico
Hyderabad will be supported as the Centre of and Hindustan Unilever as these
Excellence for sharing best practices, research companies are focusing on enhancing
and technologies at the international level. their food business by addition of
healthy products (including millets).
Overall millets market in India is
around Rs. 4 lakh crore.
Boost to consumer sentiments: For rural/ Positive Government tried to provide some
agriculture sector - Agri fund for agri start- boost to consumer sentiments in rural
up in rural area, budget of Rs. 220 crore for as well as urban markets. Positive for
horticulture crops, agri credit to be increased to consumer goods sector.
Rs. 20 lakh crore. Provided multiple benefits to
taxpayers under the new regime.
Budget impact: Positive
Sector view: Positive (Preferred picks: Indian Hotels Company, Lemon Tree Hotels, Thomas Cook India ABFRL and Trent)
Focus on domestic tourism: Develop 50 Positive Positive for hotel companies such as
destinations with details of all the relevant Indian Hotel Cos, Lemon Tree Hotels
aspects to be made available on an app to and tourism operators such as Thomas
enhance tourist experience. Launch of ‘Swadesh Cook India.
Darshan Scheme’ for integrated development
of theme-based tourist circuits. Develop
sector specific skilling and entrepreneurship
to achieve the objectives of the ‘Dekho Apna
Desh’ initiative. Set up a Unity Mall in each state
for promotion and sale of their own ODOPs
(one district, one product), and other handicraft
products.
Jewellery (diamonds): To encourage Positive Positive for branded Jewellery
Consumer
indigenous production of LGD seeds and companies such as Titan Company
Discretionary
machines and to reduce import dependency, a and Kalyan Jewellers currently
research & development grant will be provided focusing on increasing contribution
to one of the IITs for five years. Custom duty from the studded Jewellery especially
rate on LGD seeds used in manufacturing of in the value segment.
rough lab-grown diamonds reduced from 5% to
NIL.
Jewellery (gold/platinum): Reduction in Positive Positive for branded Jewellery
customs duty on gold dore from 11.85% to 10%, companies such as Titan Company
on gold (including gold plated with platinum) and Kalyan Jewellers.
unwrought or in semi manufactured forms or in
powder form from 12.5% to 10% and on platinum,
unwrought or in semi-manufactured form or in
powder form from 12.5% to 10%.

February 01, 2023 7

 Budget Special
Sectoral analysis
Sector Key announcements Overall impact Key companies impacted
Budget impact: Positive
Sector view: Positive (Preferred picks: Reliance Industries, BPCL)
Capital outlay for OMCs: FY24 Capital/ Positive Positive for IOCL, BPCL and HPCL
budgetary support of Rs. 30,000 crore for
OMCs. This could be relief from auto fuel under-
recoveries.
Oil & Gas Priority capital investments of Rs. 35000 crore Long-term Long term positive for companies like
towards energy transition and net zero target Positive RIL, IOCL among others
Investment of Rs. 10,000 crore for setting up of Positive Positive for gas companies especially
CBG plants. Petronet LNG as it plans to put CBG
plant.
Budget impact: Positive
Sector view: Positive (Preferred picks: NTPC and Power Grid)
Battery storage: Viability Gap Funding support Positive Positive for Power Grid
for Battery Energy Storage Systems with
capacity of 4,000 MWH.
Government support of Rs. 8,300 crore for Positive Positive for Power Grid
Inter-state transmission system (total project
Power
cost of Rs. 20,700 crore) for evacuation and grid
integration of 13 GW renewable energy from
Ladakh.
Green hydrogen: Production target of 5mmt by Positive Positive for NTPC
2030.
Budget impact: Positive
Sector view: Positive (Preferred picks: PI Industries, Sumitomo Chemical India, SRF)
Fertiliser subsidy: Fertiliser subsidy provision Positive Positive for fertilisers companies
has been increased to Rs. 225,222 crore from including National Fertilisers Limited,
earlier budget provision of Rs. 105,222 crore for Madras Fertilisers, Deepak Fertilisers
FY23. Fertiliser subsidy of Rs. Rs. 175,103 crore and Coromandel International.
for FY24.
Agri, fertilisers and
chemicals Budgetary allocation of Rs. 2,200 crore for Positive Positive for Agri-input companies like
horticulture crops, agri credit to be increased to Sumitomo Chemical India, Dhanuka
Rs. 20 lakh crore among others.
Customs duty on acid grade fluorspar cut to Positive Positive for SRF/ Navin Fluorine
2.5% from 5% earlier.
Budget impact: Positive
Sector view: Positive (Preferred picks: NA)
Exemption of basic customs duty to continue for Positive Positive for steel companies like Tata
raw materials for manufacture of CRGO Steel, Steel, JSW Steel, JSPL.
ferrous scrap and nickel cathode
Metal & Mining
Infrastructure capex of Rs. 10 lakh crore and Positive Positive for steel companies like Tata
railway capex of Rs. 2.4 lakh crore to drive steel Steel, JSW Steel, JSPL and SAIL.
demand
Budget impact: Positive
Sector view: Positive (Preferred picks: Maruti, Exide Industries and Amara Raja Batteries)
Increase in custom duty on import of vehicles Positive Positive for Maruti Suzuki, M&M and
1) Increase in custom on SKD from 30%+3% Tata Motors as the increase in custom
surcharge to 35% , (2) Increase in custom duty duty would increase the prices of
on CBUs from 60% plus 6% surcharge to 70% imported vehicles.
Automobile and (CIF > USD 40k, diesel >2500 cc , petrol > 3000
Auto Ancillaries cc and EVs in CBU)
Sector Custom duty exemption on import of Positive Positive for Exide Industries and Amara
machineries: Customs duty exemption Raja Batteries as they are setting up
on machineries for manufacturing of lithium-ion Lithium-Ion cell manufacturing plants.
cell for EVS (Up to March 2024)

February 01, 2023 8

 Budget Special
Sectoral analysis
Sector Key announcements Overall impact Key companies impacted
Budget impact: Neutral
Sector view: Positive (Preferred pick: Bharti Airtel)
Pradhan Mantri PVTG Development Mission Positive The extension of telecom connectivity
to be launched to improve socio-economic is positive for Bharti Airtel Ltd., Reliance
Telecom conditions of the particularly vulnerable tribal Industries, Sterlite Technologies, Tejas
groups by providing basic facilities including Networks, among others
telecom connectivity
Budget impact: Banking -Positive, NBFCs -Neutral; Insurance - Negative
Sector View: Positive (Preferred picks: ICICI Bank, Axis Banks, HDFC Bank, SBI, Canfin Homes, Chola)
MSMEs to receive additional Rs. 2 lakh crore Positive It would boost the overall system credit
collateral-free loans under credit guarantee growth as credit offtake from MSMEs
scheme with 1% interest rebate through infusion increases. Positive for banks
of Rs. 9,000 crore from government.
Allocation increased to Rs. 79,590 crore up Positive Positive for HFCs
66% yoy for affordable housing under Pradhan
Mantri Awas Yojana (PMAY)
Income from insurances policies where the Negative Negative for life insurers as flows
premium is over Rs. 5 lakh will not be exempt. towards high ticket size PAR & Non-
Applicable for policies issued from April 23 PAR savings product will reduce that
based on cumulative premiums paid over the would affect top line by ~10% in new
Banking & Financial years business going forward. Bottom line
Services impact will be lower as these high
ticket product segment have relatively
lower margin.
National financial information registry will be Positive It will facilitate efficient flow of credit,
set up to serve as the central repository of promote financial inclusion, and foster
financial and ancillary information financial stability.
Income from market linked debentures is Negative Negative for NBFCs as cost of MLDs
proposed to be taxed as short-term capital would now be higher in line with other
gains NCDs as income from MLDs would
now be taxed at an individual tax rate
versus 10% as long-term equity gains.
Previously, due to tax differential,
MLDs cost were lower.
Budget impact: Positive
Sector view: Positive (Preferred picks: KNR Constructions, PNC Infratech)
Effective Capital investment outlay including Positive KNR Constructions, PNC Infratech,
states and off balance sheet has been among others
increased to Rs. 13.7 lakh crore from Rs. 10.5
lakh crore. Continuation of 50-year interest
free loan to state governments to incentivize
infrastructure investment with increased outlay
of Rs. 1.3 lakh crore.
Outlay towards MoRTH has been increased Positive KNR Constructions, PNC Infratech,
by 36%/25% versus FY23BE/FY23RE at Rs. among others
Infrastructure 2,70,435 crore. Outlay for NHAI has been
increased by 21%/14% versus FY23BE/FY23RE
at Rs. 1,62,207 crore.
Pradhan Mantri Gram Sadak Yojana outlay for Positive KNR Constructions, PNC Infratech,
FY2024 kept flat at Rs. 19,000 crore compared among others
to FY23BE and FY23RE.
Jal Jeevan Mission outlay for FY2024 increased Positive PNC Infratech
by 17%/27% versus FY23BE/FYRE at Rs. 70,000
crore.

February 01, 2023 9

 Budget Special
Sectoral analysis
Sector Key announcements Overall impact Key companies impacted
Budget impact: Positive
Sector View: Positive (Preferred picks - UltraTech, Shree Cements, Dalmia Bharat, JK Lakshmi Cement)
Higher allocation to MoRTH (up by 35.8%), Positive UltraTech, Shree Cements, Dalmia
Pradhan Mantri Awaas Yojana (up 65.8%), Smart Bharat, JK Lakshmi Cement, among
Cities (up 17.6%), AMRUT (up 9.6%) vis-à-vis others
FY23BE.
Cement
Establishment of Urban Infrastructure Positive UltraTech, Shree Cement, Dalmia
Development Fund (UIDF) to create urban Bharat, JK Lakshmi Cement, among
infrastructure in Tier 2 and Tier 3 cities providing others
Rs. 10,000 crore per annum.
Budget impact: Positive
Sector view: Positive (Preferred picks: Century Plyboards, Greenlam Industries, Supreme Industries, Astral, APL Apollo)
Pradhan Mantri Awas Yojana (urban plus rural) Positive Kajaria Ceramics, Century Plyboards,
outlay increased by 66%/3% to Rs. 79,590 crore Greenlam Industries, Supreme
vis-à-vis FY23BE/FY23RE. Industries, Astral, APL Apollo
Allocation towards Smart Cities increased by Positive Kajaria Ceramics, Century Plyboards,
Building materials 3%/5.4% to Rs. 6,800 crore vis-à-vis FY22RE/ Greenlam Industries, Supreme
FY22BE. Industries, Astral, APL Apollo
Jal Jeevan Mission outlay for FY2024 increased Positive Supreme Industries, Astral, Hitech
by 17%/27% versus FY23BE/FYRE at Rs. 70,000 Pipes, APL Apollo
crore.
Budget impact: Negative
Sector view: Positive (Preferred picks: DLF, Macrotech Developers, Oberoi Realty, Prestige Estates)
Capping of deduction available from capital Negative DFL, Oberoi Realty
gains on investment in residential house under
sections 54 and 54F where the cost of new
asset does not exceed Rs. 10 crore.
Real Estate
The income received from business trusts by Negative Embassy Office Parks REIT, Mindspace
manner of ‘Repayment of debt’ to unitholders Business Parks REIT, Brookfield India
will be taxable w.e.f. April 1, 2024 which was REIT, IRB InvIT, Powergrid InvIT
earlier exempted.
Budget impact: Positive
Sector view: Positive (Preferred picks: L&T, Cummins India)
Capital expenditure outlay increased by 33.3% Positive Positive for the entire capital goods
y-o-y to Rs. 10 lakh crore (Rs. 7.5 lakh crore in and engineering sector
FY22-23).
Railways: Highest ever capital outlay of Rs. Positive Positive for Cummins India, Siemens
2.41 lakh crore from Rs. 1.4 lakh crore in FY22- India. Negative for Titagarh Wagons,
23; an increase of 71% y-o-y. The outlay for BEML, Texmaco Rail as allocation to
metro projects at Rs. 19,518 crore (up 25% y-o-y rolling stock capex has reduced by
from RE of FY22-23). 21% y-o-y.
Defence: Allocation to Ministry of defence at Rs. Neutral Neutral for BEL, L&T, Astra Microwave
5.94 lakh crore vs Rs. 5.25 lakh crore in FY22- Products. Sentimentally negative
23. Lower than expected defence capex outlay for Bharat Dynamics and HAL as air
Capital Goods/ for new weapons, aircraft, and other military force had the least increase of 6% in
Defence/Consumer hardware at Rs. 1.62 lakh crore (+8% y-o-y). allocation at Rs. 57,137 crore.
Electronics
Renewable Energy: The Inter-state transmission Positive KEC International, Kalpataru Power
system for 13 GW renewable energy from Transmission among others
Ladakh with an investment of Rs. 20,700 crore.
Consumer Electronics: Reduction in basic Positive Dixon Technologies, as it imports open
customs duty on parts of open cells of TV cells and manufactures mobiles
panels to 2.5% from 5%. Custom duty of 2.5%
reduced to nil on camera lens/ input parts for
camera module of cellular mobile phones.
The basic customs duty on electric kitchen Positive Domestic chimney manufacturers like
chimney increased from 7.5% to 15%. Further, Inflame Appliances Ltd.
duty on heat coils reduced from 20 % to 15 %.

February 01, 2023 10

 Budget Special
Sectoral analysis
Sector Key announcements Overall impact Key companies impacted
Budget impact: Neutral
Sector view: Neutral (Preferred Picks: Infosys, TCS, Coforge Persistent)
Setting up of three centres of excellence Positive Nurture talent and build potential
for Artificial Intelligence in Top Educational resources for Technology companies
Information Institutions
Technology Digital Public infrastructure for Agriculture Positive Provide market intelligence, support for
Agritech industry & start-ups - Positive
for IT companies.
Budget impact: Positive
Sector view: Positive (Preferred picks: Sun Pharma, Cipla, Dr. Reddy’s, Zydus Lifesciences, Biocon)
Facilities in select ICMR Labs will be made Positive Sun Pharma, Cipla, Dr. Reddy’s, Zydus
available for research by public and private Lifesciences and Biocon
medical college faculty and private sector R&D
teams for encouraging collaborative research
and innovation.
A new programme to promote research and Positive Sun Pharma, Cipla, Dr. Reddy’s, Zydus
innovation in pharmaceuticals will be taken up Lifesciences and Biocon
through centres of excellence. The government
plans to encourage industry to invest in
research and development in specific priority
areas.
Pharmaceuticals/
Healthcare Allocation to Development of Pharmaceutical Positive Sun Pharma, Cipla, Dr. Reddy’s, Zydus
Industry increased from Rs. 100 crore to Rs. Lifesciences and Biocon
1,250 crore.
It is likely be distributed between
Pharmaceutical Promotion and Development
Scheme (PPDS) at Rs. 40 crore; assistance to
Pharmaceutical Industry for Common Facilities
(API-CF)/Cluster Development at Rs. 51 crore;
Pharmaceuticals Technology Upgradation
Assistance Scheme (PTUAS) at Rs. 95 crore,
Promotion of Bulk Drug Parks at Rs. 900 crore
and Promotion of Medical Device Parks at
Rs. 200 crore.
Source: Budget documents, Sharekhan Research

February 01, 2023 11

 Budget Special
Budget in Charts

Budget Reciepts Budget Expenditure

Other Centrally
Non-Debt
Non-Tax Capital
Expenditure sponsored
revenue 2% 8% Schemes
Pensions
6% 4% 9%
GST & other Central Sector
tax Schemes
States share of
17% Borrowing & 17%
tax duties
other liabilities 18%
Union Excise 34%
Duties
7%
Finance Interest
Customs
Commission & Payments
4%
other 20%
Income tax Corporation 9% Subsidies
15% tax Defence
7%
15% 8%

Source: Budget documents, Sharekhan Research Source: Budget documents, Sharekhan Research
Note: Total receipts are inclusive of States’ share of taxes and duties Note: Total expenditure is inclusive of the States’ share of taxes and duties

Gross tax revenue and Tax as % of GDP Rs. ‘00 cr Fiscal deficit movement and FD as % to GDP Rs. ‘00 cr

40,000 12.0 20,000 10.0

11.5 8.0
30,000 15,000
11.0 6.0
20,000 10.5 10,000
4.0
10.0 5,000
10,000 2.0
9.5
- 9.0 - -

FY23RE

FY24BE
FY17

FY18

FY19

FY20

FY21

FY22
FY23RE

FY24BE
FY17

FY18

FY19

FY20

FY21

FY22

Gross Tax Revenue Tax/GDP ratio (%) Fiscal Deficit Fis. Deficit to GDP (%)
Source: Budget documents, Sharekhan Research Source: Budget documents, Sharekhan Research

Trends in Tax Receipts (% of GDP) Net Receipts of the Center (Rs in lakh crore)

25.0 5.6 40.0

5.2 5.6 5.4 4.9 4.7 5.4 5.1
4.7 4.4 4.3 5.1 0.8
20.0 30.0 0.8
5.6 6.0 6.0 6.0 6.0 0.4 6.4
5.5 5.6 5.5 5.4 5.2 4.8 6.0 5.9
15.0 20.0 0.7 0.6 6.3
11.7 11.1 1.1
10.2 10.1 9.9 10.6 11.2 11.4 10.9 9.9 10.3 11.1
0.7
2.7
1.2
1.9 2.4 3.3 2.1
10.0 10.0 20.9 23.3
13.2 13.6 14.3 18.0
11.0 12.4
5.0 -
FY23RE

FY24BE
FY17

FY18

FY19

FY20

FY21

FY22

0.0
FY23RE
FY24BE
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22

Net Center's Tax revenue Non Tax Revenue

Gross Tax Receipt Direct Tax Indirect Tax Non Debt Capital Receipt
Source: Budget documents, Sharekhan Research Source: Budget documents, Sharekhan Research

February 01, 2023 12

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