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Stocks of most capital goods and engineering companies are seen marginally up next week on account of incentives offered to the sector in the Union Budget 2013-14. Compared to many other sectors, capital good and engineering has been offered at least some relief. The Budget proposed 15% deduction to companies purchasing plant and machinery worth more than 1 bln rupees over the next two financial years. The attempt is to improve the investment climate and we believe that several projects, particularly in the small and medium enterprises, could be accelerated. This could have a positive effect on product-based companies like Cummins India and Thermax. Apart from this, stocks of capital goods companies that make transmission and distribution equipment may see some gains on account of improved sentiment. The government announced financial support to power distribution companies of around 15 bln rupees in 2013-14 (Apr-Mar) towards the debt restructuring plans.
This is positive for companies in the T&D sector, and companies like BGR Energy with significant exposure to state electricity boards. The Budget also offered some relief to renewable energy equipment makers. The government committed to provide low cost finance from the National Clean Energy Fund to the Indian Renewable Energy Development Agency, which would then lend to viable renewable energy projects. The government also reintroduced 'generation-based incentives' for wind energy projects. For this, the finance ministry will give 8 bln rupees to the ministry of non-renewable energy. This is a positive for beleaguered wind energy company Suzlon Energy, which is in the process of restructuring its debt. The company was looking forward to the generation-based incentive policy to be reintroduced amidst dwindling domestic sales.
The Budget also announced the formation of a cabinet committee on investment to monitor investment proposals as well as projects under implementation, including stalled projects, and to guide decision-making in order to remove bottlenecks and quicken the pace of implementation. Contentious issues in (the infrastructure and power sector) need to be addressed for a revival in the investment climate, and the current attempts are in the positive direction. The formation of a new committee may add more hurdles than help push stalled projects forward.
Stocks of most capital goods and engineering companies are seen marginally up next week on account of incentives offered to the sector in the Union Budget 2013-14. Compared to many other sectors, capital good and engineering has been offered at least some relief. The Budget proposed 15% deduction to companies purchasing plant and machinery worth more than 1 bln rupees over the next two financial years. The attempt is to improve the investment climate and we believe that several projects, particularly in the small and medium enterprises, could be accelerated. This could have a positive effect on product-based companies like Cummins India and Thermax. Apart from this, stocks of capital goods companies that make transmission and distribution equipment may see some gains on account of improved sentiment. The government announced financial support to power distribution companies of around 15 bln rupees in 2013-14 (Apr-Mar) towards the debt restructuring plans.
This is positive for companies in the T&D sector, and companies like BGR Energy with significant exposure to state electricity boards. The Budget also offered some relief to renewable energy equipment makers. The government committed to provide low cost finance from the National Clean Energy Fund to the Indian Renewable Energy Development Agency, which would then lend to viable renewable energy projects. The government also reintroduced 'generation-based incentives' for wind energy projects. For this, the finance ministry will give 8 bln rupees to the ministry of non-renewable energy. This is a positive for beleaguered wind energy company Suzlon Energy, which is in the process of restructuring its debt. The company was looking forward to the generation-based incentive policy to be reintroduced amidst dwindling domestic sales.
The Budget also announced the formation of a cabinet committee on investment to monitor investment proposals as well as projects under implementation, including stalled projects, and to guide decision-making in order to remove bottlenecks and quicken the pace of implementation. Contentious issues in (the infrastructure and power sector) need to be addressed for a revival in the investment climate, and the current attempts are in the positive direction. The formation of a new committee may add more hurdles than help push stalled projects forward.
