The budget has broadly laid out the roadmap for moving to $5 trillion GDP by 2025 and then to $10 trillion GDP beyond 2030. This opens up a huge business opportunity for India Inc that will exist irrespective of the specific budget announcements. Here are key corporate takeaways from the budget.
Public shareholding hiked
The proposal to raise public share holding from 25% to 35% will matter to companies with promoter shareholding in excess of 65% and there are more than 1400 such companies in India currently. This is still a proposal to SEBI and not yet ratified by the regulator. It also remains to be seen if this will be done in a phased manner, as is most likely. Companies may look to financial engineering products like participating preference shares to get around this requirement. We will have to watch!
Taxation on buybacks
This is again relevant to cash rich companies which use the buyback route rather than paying dividends. A lot of IT companies have adopted this route to pay lower tax than dividends. The budget has sought to remove this tax arbitrage by taxing buybacks also at 20%.This will discourage companies from opting for buybacks as a more tax efficient route. Companies could now become keener about paying cash dividends to shareholders.
Big boost for banks and NBFCs
Banks and NBFCs continue to be the pivot of the Indian corporate scene as they jointly account for nearly 40% of the Nifty market capitalization. The budget has allocated Rs.70,000 crore for bank recapitalization and that will be positive for PSU banks that have the NPA checks and the balance sheet size to expand their asset books. The first signs of NBFC regulation were also there with housing finance companies (HFCs) being brought under RBI regulation rather than NBH regulation. The much talked about line of credit for NBFCs will ensure that the solvent names will not be stuck for liquidity. Above all, the RBI regulating HFCs will bring in more transparency, not to forget the extra tax benefits for affordable homes. Overall, banks and NBFCs have reason to be happy from a long term perspective.
Over to Electric Vehicles
The budget has given a fillip to electric vehicles. Firstly, there will be the duty-free import of parts and equipment that will be permitted for EV companies. Secondly, the GST for Electric Vehicles is likely to be reduced from the current 12% to 5% to make them more affordable. Lastly, in an innovative move, the budget has also promised income tax exemptions on interest paid on EV loans. In a nutshell it is a big boost for the EVs. Now the onus is on the auto companies to go green! ©