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Budget Impact – First View

July 6, 2009

The FM raised MAT from 10% to 15%. Impact of MAT
Impact of MAT tax rate increase to 15% impact on EPS owing to MAT (First Cut)

– Reliance: 7%
– Cairn India: 6%
– Bharti 3.4-0.4%
– RCom 5.5-1.6%
– Idea 5.7-3.7%
– Sun Pharma (local entity’s tax rate goes up and this will result in increase in consol tax rate by 50-100bps resulting in 0.8-1.5% downgrade to EPS).
– Cipla would get impacted as they would enter MAT scenario in FY10 and FY11 (c.1.5-2% EPS downgrade).
– Mphasis BFL
– Power Grid is currently under MAT however the tax expense is a pass through for the company.
– Tata Motors is on MAT too.
– Sterlite (because of Sterlite Energy)
– JSPL (because of Jindal Power)

Negative for Banks and Real Estate:
Banks -ve due to bond yields likely to move out. Disappointment for HDFC and banks due to tax exemption limit on mortgage interest not being raised.

Real Estate -ve due to increase in MAT rate and tax exemption limit on mortgage interest not being raised.

Additionally STPI scheme has been extended for one more year. While on expected lines, only a small negative for IT-SEZ developers. The new IT Units will anyway go to IT-SEZs.

Fringe Benefit Tax (FBT) has been abolished: FBT on ESOPs was already passed through to employees. This is positive for Tech Mahindra’s and Hexaware’s top-management which has large number of outstanding ESOPs. Otherwise, little impact on earnings

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