Union Budget FY 2020-21 - Kotak Mutual Fund

 
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Union Budget FY 2020-21 - Kotak Mutual Fund
Union Budget FY 2020-21

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Union Budget FY 2020-21 - Kotak Mutual Fund
Budget Stands on Three Themes and Two Approaches

        Governance                                         Ease of living                                  Financial Sector

         Aspirational India                            Economic Development                                   Caring Society

•   PM KUSUM to cover 20 lakh farmers for       •   Rs 27,300 Crs towards development of           •   INR 35,600 crs will be provided
    stand alone solar pumps and 15 lakh for         Industry for FY21                                  towards Nutritional improvement
    grid connected pumps.                                                                              programme
                                                •   Rs. 103 lakh crore National infrastructure
•   Agricultural credit target of Rs. 15 lakh       Pipeline projects announced across 6500        •   INR 85,000crs to be allocated towards
    crore for FY21.                                 projects.                                          SC/ ST and Other Backwards
•   162mn mt Cold Storage facility to           •   Rs 22,000 crs will be allocated towards        •   Thermal Power Plant which pollution
    Mapped and Geo Tagged by NABARD.                Renewable Energy in 2020 -21                       limiting in excess of the regulatory
                                                                                                       should be shut down
•   Fish Production Target of 200 lakh tonnes •     National Gas Grid to be expanded to 27,000km
    by 2022- 23                                                                                    •   INR 4400 crs to be allocated to Clean
                                              •     INR 8000 crs will be provided towards
                                                                                                       Air
•   Rs. 3.6 lakh cr allocated to Jal Jivan          National Mission on Quantum Technologies
    Scheme

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Union Budget FY 2020-21 - Kotak Mutual Fund
Budget Aims To Improve Ease Of Business & Ease Of Living

Measures to Improve Ease of Business & Ease of
                                                              Impact On Businesses and Individuals
                   Living

                                                    To ensure fairness to all assesses and to ensure that tax
Institute “Taxpayers Charter” in the Income Tax
                                                    officials do not end up harassing citizens in the process
Act
                                                    of collecting taxes – positive for removing pressure

Removal of Criminal Liability For Acts That Are
Civil in Nature                                     Incentive to businesses and build trust and confidence
                                                    if executed correctly
Strengthening enforcement of Contracts

                                      Implementation is Key

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Infrastructure : High on focus, Execution is the key
National Infrastructure Pipeline is the guiding force

• National Infrastructure Pipeline (NIP) was announced with Rs.103 Tn capex with 6,500 identified projects.
• Rs. 220 Bn support provided to IIFCL & NIIF, which will leverage and provide equity and long term financing for the NIP.
• Accelerated development of highways with 2500 Km access control highways, 9000 Km of economic corridors, 2000 Km of
  coastal and land port roads and 2000 Km of strategic highways.
• Gross Budgetary Support to Road sector is at around Rs. 1.6 Tn.
• Railways: Investment target is increased to Rs. 1.6 Tn
                                                                                                                     %
                                                                                                                FY21BE/FY20
INR in Billion                             FY15     FY16      FY17       FY18     FY19     FY20 RE    FY21 BE        RE
Roads and Bridges                           345      715      1035       1115     1406      1580       1568        -0.8%
Railways                                    565      975      1210       1020     1389      1537       1630         6.0%
Renewable Energy                            85        58       167        141      160       164        195        19.1%
Power                                       739      783       725        734      888       683        658        -3.8%
Drinking water and sanitation               121      111       165        239      350       254        335        32.2%
Ports & Shipping                            16        31        33        58        74        57         55        -2.4%
Water Resources, River development
&Ganga Rejuvenation                          9       11        69         84       157      125         140        12.5%
Total                                      2048     2977      3972       4080     5196      5684       5346        -5.9%
Source: Budget documents                                                                                               4
Budget – Receipts and Expenditures

               WHERE RUPEE COMES FROM                                WHERE RUPEE GOES TO
                                       Borrowngs              Central                                Centrally
       Corporation                      & Other               Sector                                Sponsored
        Tax, 18%                       Liabilities,        Scheme, 13%                             Scheme, 9% Other
                                          20%                                                                Expenditure,
                                                                                                                 10%

                                            Non-Debt
                                                          Interest
                                             Capital                                                        Pensions, 6%
                                                         Payments,
                                            Receipts,
Income-Tax,                                                 18%
                                               6%
    17%
                                                                                            States' share
                                                                                              of taxes &
                                               Non-Tax                                       duties, 20%
                                                         Defence, 8%
                                              Revenue,
     Customs, 4%                                 10%
                                        Goods &
              Union Excise            Services Tax,                           Finance Commission &
               Duties, 7%                                     Subsidies, 6%
                                          18%                                  Other Transfers, 10%
Source: Union Budget FY21 Documents                                                                          5
Fiscal Discipline With Moderate Slippage Despite
Challenges
                                                                                             In % GDP
                                      2018-19      2019-20 2019-20 2020-21                 2021-22      2022-23
                                       Actuals     Budget    Revised   Budget
                                                  Estimates Estimates Estimates
                                                                                             (Projections)
                    Fiscal Deficit
                                         3.4          3.3         3.8          3.5           3.3          3.1
                  Revenue Deficit
                                         2.4          2.3         2.4          2.7           2.3          1.9
          Effective Revenue Deficit
                                         1.4          1.3         1.5          1.8           --           --
                  Primary Deficit
                                         0.4          0.2         0.7          0.4           0.2          0

                                      Fiscal Deficit remains within FRBM slippage target

Source: Union Budget FY21 Documents                                                                               6
Govt Borrowing in Line With Market Expectations In
FY21BE
Gilt yields now a function of RBI Policy and Macros

                                                                   • Effectively there has been no extra borrowing this year. This is a
                                       2019-20 2019-20   2020-21     positive for the bond market. We could expect the yields to
           (Rs. Bn)                      BE      RE        BE        soften in the near-term
                                                                   • The gross borrowing for FY21 is in line with market expectations
 Fiscal Deficit                        3.30%    3.80%    3.50%
                                                                   • Higher planned switches for next year at Rs. 2700 Bn is a
                                                                     negative for duration. However the actual switches may reduce
 Gross Borrowing                        7100    7100      7800
                                                                     in case these switches turns out to be disruptive. Hence the
                                                                     market may not worry about higher switches in the short term
 Net Borrowing                          4730    4730      5450
                                                                   • Going ahead, 10 yr Gilt would be influenced largely by RBI policy
 T-Bill                                          250                 (growth and inflation dynamics) and Continuation of RBI
                                                                     Operation Twist programme. Higher liquidity in the system and
                                                                     low credit off take are also positive for Gilt Market and Bond
 Switches                               500     1650      2700
                                                                     Market
                                                                   • We expect 10 yr Gilt to trade in the band of 6.25-6.75% yield for
                                                                     next 3 months.

 Source: Union Budget FY21 Documents                                                                                           7
Reviving Growth Needs Credit; Reviving Credit Needs Capital –
And Budget is working towards that

   Key Budget Proposals for Capital
                                                    Impact                             Results
              Markets
Incremental Rs. 2.11 tn of Corporate Bond FPI
                                                               There is enough space currently so demand pickup needs
limits (going up from 9% of outstanding to 15% of   Positive
                                                               to be seen.
outstanding)
Opening up of specific Government Bond limits
freely for Non-Resident Investors. Roadmap being    Positive   Positive for Bonds
developed
                                                               Will increase retail participation alongside being an
ETF on Government Securities                        Positive   attractive investment for pension funds and long-term
                                                               investors.
Proposed to formulate legislation for laying down
mechanism for netting off of financial contracts    Positive   This will help in deepening of corporate bond market
for development of Credit Default Swap market.

Disinvestment in LIC IPO, BPCL, Air India, CONCOR              Gives fiscal headroom, improves overall economic
                                                    Positive
and IDBI have been identified besides the ETFs                 productivity and reduce subsidisation burden
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Key Budget Proposals for Capital Markets

                   Proposals                        Impact                              Results

 “Withholding tax” exemption of 5% on
 investment in bonds for NRI’s extended for
                                                    Positive   Provides tax certainty on tax on coupon
 3year period to June 2023 from current expiry
 of June 2020.

 SWFs (Sovereign wealth funds) to not pay any
                                                               Will increase attractiveness of India as an asset class for
 tax on dividend/interest for their investment in   Positive
                                                               SWFs.
 Infrastructure companies.

 Deposit Insurance amount increased from Rs. 1
                                                    Positive   High protection for retail investors
 lakh to Rs. 5 lakh

                                                               This will widen the window for NBFCs to tap liquidity
 NBFCs – the current partial credit guarantee                  through this route
                                                    Positive
 scheme would be revised and extended

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Choice of lower income tax rate for individuals who forego
  incentives
  (Old Slabs stay for those who want to continue to claim deductions)

              Income Tax Slabs of Individual below 60 years of age                                                           • New tax slabs have been introduced as
                                                 EXISTING TAX RATE                      NEW TAX SLABS                          below if individuals do not claim any
              Income Slab
                                                    (INCOME Rs)                          (INCOME Rs)                           deduction or exemption (optional for the
          Upto Rs 2.5 Lakhs                             0%                                   0%                                taxpayer)
      Rs 2.5 Lakh to 5 Lakhs                                  5%                                  5%                         • Dividends received shall be taxed in the
   Rs 5 Lakhs to Rs 7.5 Lakhs                                20%                                 10%                           hands of recipients at their applicable
                                                                                                                               tax rate
  Rs 7.5 Lakhs to Rs 10 Lakhs                                20%                                 15%
                                                                                                                             • Levy of perquisite tax on salaried
 Rs 10 Lakhs to Rs 12.5 Lakhs                                30%                                 20%                           employees if the contribution to EPF,
 Rs 12.5 Lakhs to Rs 15 Lakhs                                30%                                 25%                           NPS, Superannuation together is higher
                                                                                                                               than Rs. 7.5 lakhs per year
           Above 15 Lakhs                                    30%                                 30%

  Since this is optional people need to carefully evaluate which is more beneficial based on the level of incentives and
  deductions which they earlier used to claim.

Disclaimer: No tax saving has been assumed to highlight the basic tax liability. This is only to illustrate the tax impact is not a tax advise. Please consult your tax consultant for tax purpose   10
DDT Gone. Tax on Income from Dividend is Now ON.

                          Companies will not be required to pay DDT                                                              Mutual funds’ perspective: DDT has also been
                          (Dividend Distribution Tax). The dividend shall                                                        abolished for MF as well. Flows should get
                          be taxed only in the hands of the recipients at                                                        diverted to growth funds over dividend funds
                          their applicable rate.                                                                                 given LTCG/STCG tax is lower than marginal tax
                                                                                                                                 rate at which dividend will be taxed

                          Dividend received by the holding company is
                          allowed for deduction in order to avoid                                                                Improves attractiveness of or the Dividend
                          cascading effect. As far as individual                                                                 Paying Companies for minority shareholders
                          promoters are concerned, the better option
                          would be through the buy-back route rather
                          than dividend route.

    Note: 10% TDS on dividends paid by companies, MFs etc. Dividends upto Rs 5000 per year to be exempt from tax liability.

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Disclaimer: No tax saving has been assumed to highlight the basic tax liability. This is only to illustrate the tax impact is not a tax advise. Please consult your tax consultant for tax purpose
Union Budget FY21 – Sectoral
          Outlook

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Summary of Sectoral Outlook

    Sector                        Outlook
    Agriculture                   Positive
    Capital Goods                 Neutral
    Telecom                       Negative
    Media                         Positive
    Cement & Building Materials   Positive
    FMCG                          Positive
    Auto                          Positive
    Infrastructure                Positive
    Real Estate                   Positive
    Oil & Gas                     Neutral
    Metals & Mining               Neutral
    Pharma                        Neutral
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Union Budget FY21: Sectoral Impact
 Agriculture: Positive
Sector                                                         Budget Proposal                                                   Nature of Impact                    Comments
                      “Pradhan Mantri KIsan SAmman Nidhi (PM-KISAN)” - To provide an assured income                                  Positive     Can help improve demand for agricultural inputs
                      support to the small and marginal farmers. Under this programme, vulnerable
                      landholding farmer families, having cultivable land upto 2 hectares, will be provided
                      direct income support at the rate of INR 6,000 per year. FY21BE at INR 750bn is 38%
                      higher than FY20RE
                      Fertilizer subsidy - Total fertilizer subsidy allocated is INR 713bn (INR 478bn for urea +                      Negative          Subsidy to Fertilizer companies will be pending at
                      INR 235bn for complex fertilizers) vs INR 800bn in FY20 RE (INR 536bn for urea + INR                                              the end of the year FY21
                      264bn for complex fertilizers). This amount will not be sufficient to take care of the back
                      log pending if raw material prices remain at current levels.
    Agriculture
                      National Rural Drinking Water Mission - Has been increased by 15% in FY21BE vs                                  Positive          Can help improve demand for agricultural inputs
                      FY20RE to INR 100bn .
                      Crop Insurance - Pradhan Mantri Fasal Bima Yojna (PMFBY) budget provision of INR                                Positive          Can help improve demand for agricultural inputs
                      157bn in FY21 vs revised estimate of INR 136bn in FY20.
                      Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) Scheme                                     Positive          Can help improve demand for agricultural inputs
                      to be expanded to provide 20 lakh farmers for setting up stand-alone solar pumps. In
                      addition, the government shall help another 15 lakh farmers solarise their grid-
                      connected pump sets. In addition, a scheme to enable farmers to set up solar power
                      generation capacity on their fallow/barren lands and to sell it to the grid would be
                      operationalized

                      Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) allocation                                     Negative          Will decrease rural income opportunities
                      has been reduced by 13% to INR 615bn in FY21BE from INR 710bn in FY20RE

The names of select companies have been mentioned in this slide for illustration purposes only. There is no guarantee that the budgetary proposals will have a positive impact on these companies as actual performance
will depend on various other parameters including quality of management, etc.                                                                                                                           14
Union Budget FY21: Sectoral Impact
 Capital Goods: Neutral; Telecom: Negative; Media: Positive
Sector                                               Budget Proposal                                  Nature of Impact                                    Comments
                               Defence capital acquisition outlay of INR 1137bn against INR               Neutral           Growth of about 4% is along the trend for past few years
                               1104bn for FY20 BE
                               Railway capex increased by 3% to INR 1.61tn from INR 1.56                   Neutral          Growth in the outlay is slightly soft compared to last few years
         Capital Goods         tn in FY20RE
                               Outlay for roads, Metro and rural roads increased from INR                  Positive         Increase of 18.8% over last year provides scope for EPC and equipment
                               801bn in FY20RE to INR 952bn                                                                 companies to grow

                               Increase in customs duty on compressors for AC for 10% to                   Positive         This would encourage manufacturing of these components in India. Not
                               12.5%; On fans from 7.5% to 20%; on PCB for mobile                                           likely to impact players dependent on imports as source can be shifted
                               phones to 10% from 0%                                                                        quickly.

Sector                         Budget Proposal                                                        Nature of Impact                                      Comments
                               Communications receipt has been estimated at INR 1,330                    Negative           Government has given moratorium of two years on EMI, so technically,
                               bn for FY21                                                                                  nil revenue from deferred spectrum liability. The difference of INR 1,129
           Telecom
                                                                                                                            bn is unexplained. This could include upfront payment for upcoming
                                                                                                                            spectrum auction & AGR payment.

Sector                           Budget Proposal                                                      Nature of Impact                                Comments
                                Basic Customs Duty on Newsprint down from 10% to 5%                       Positive     Lower Raw Material cost for Print sector
                                for importers that are registered with the Register of
            Media               Newspapers
                                Basic Customs Duty on Light-weighed coating paper                          Positive         Lower Raw Material cost for Print sector
                                imported for printing of magazines reduced from 10% to
                                5%

 The names of select companies have been mentioned in this slide for illustration purposes only. There is no guarantee that the budgetary proposals will have a positive impact on these companies as actual
 performance will depend on various other parameters including quality of management, etc.                                                                                                     15
Union Budget FY21: Sectoral Impact
 Cement and Building Materials: Positive
Sector                                                           Budget proposals                                                 Nature of impact                     Comments
                                Time line for additional deduction under income tax of up to INR 0.15 mn for                          Positive     Housing and real estate sector accounts for
                               interest paid on loan taken for purchase of an affordable house and tax holiday                                     ~65% of overall cement consumption in India
                               period for developers of affordable housing project is extended by one more year i.e.                               and this will increase the overall cement
                               up to 31st March 2021.                                                                                              demand. Housing demand will have spillover
                                                                                                                                                   effect on building materials demand as well
                               Overall PMAY allocation increased 8.6% to INR 275 bn in FY21 BE.

                               Allocation to PMAY (Urban) in FY21 BE increased by 16.7% to INR 80 bn vs INR 68 bn
                               in FY20 RE.

   Cement and building         PMAY (rural) allocation has been increased by 5.5% to INR 195 bn in FY21 BE vs INR
       material                185 bn in FY20 RE
                               Pradhan Mantri Gram Sadak Yojna allocation increased 38.6% to INR 195 bn in FY21
                               BE from INR 140 bn in FY20 RE
                               Allocation to NHAI increased by 11% to INR 913 bn in FY21 BE

                               Increased customs duty on furniture from 20% to 25% that should help MDF
                               manufacturer
                               Penalty on fake invoices under GST to curb rampant practice of fraudulent ITC claim.

                               Allocation to Swach Bharat Mission budget increased by 28% to INR 122 bn in FY21
                               BE

  The names of select companies have been mentioned in this slide for illustration purposes only. There is no guarantee that the budgetary proposals will have a positive impact on these companies as actual
  performance will depend on various other parameters including quality of management, etc.                                                                                                   16
Union Budget FY21: Sectoral Impact
FMCG & Auto: Positive
Sector                                                   Budget Proposal                                  Nature of Impact                                   Comments
                               Various initiative to increase rural income                                    Positive            Increases rural consumption benefiting companies having higher
                                                                                                                                  rural salience
                               Reduction in tax rate upto INR 1.5mn                                            Positive           Higher disposable income especially with millenials to boost
         Consumer                                                                                                                 consumption. QSR's , apparels, multiplexes etc to benefit. Positive
                                                                                                                                  for names like Emami, Lux

                               Hike in NCCD tax rate on cigarettes                                             Negative           Impede the profitability of the cigarette companies like ITC

                               Custom duty increased on footwear from 25% to 35% and on                        Negative           Cost for shoes especially sports shoes should increase as majority
                               parts of footwear from 15% to 20%                                                                  are imported. This will be negative for organised players as
                                                                                                                                  unorganised share in footwear is very high

Sector                                                   Budget Proposal                                   Nature of Impact                                   Comments
                               Various initiative to increase rural income                                     Positive           Positive for farm equipment, two wheelers, utility Vehicle
                                                                                                                                  manufacturers
                               Increase in duties for CBUs of CVs                                               Positive          Positive for commercial vehicle players
            Auto               Reduction in tax rate upto INR 1.5 mn                                            Positive          Positive for two wheelers and passenger car manufacturers
                               Basic Customs Duty on catalytic converters increased from                       Negative           Increased cost for Auto OEM's
                               10% to 15% and on noble metal solutions and compounds
                               used in catalytic converters from 5% to 10% and parts and
                               other specified inputs for manufacture of catalytic converters
                               from 5% to 7.5%

 The names of select companies have been mentioned in this slide for illustration purposes only. There is no guarantee that the budgetary proposals will have a positive impact on these companies as actual
 performance will depend on various other parameters including quality of management, etc.                                                                                                   17
Union Budget FY21: Sectoral Impact
Infra, Real Estate, Industrials: Positive
Sector                                           Budget Proposal                      Nature of Impact                                      Comments
                            Roads sector outlay though flat at INR 1.6 tn is positive     Positive     Positive for both developer and construction companies.
                            as Government support is up while borrowing are
                            down
     Infrastructure         Railways Capex up 6% to INR 1.6 tn                            Positive     Positive for contractors like L&T, RVNL, KEC and Kalpataru
                            100% Tax exemption to foreign Sovereign Wealth Funds          Positive     Positive for both developer and construction companies.
                            (SWFs) on interest/dividend or Capital Gains, on
                            investments made in priority sectors by March 2024
                            (min lock-in of 3 years).
                            Continued focus on Affordable housing with tax                        Positive         RE sector focus contractors like JMC Project, NCC, Simplex,etc could be
                            exemption to developers, buyer                                                         beneficiary.

Sector                                          Budget Proposal                              Nature of Impact                                  Comments
                            Benefits under section 80-IBA extended till March 2021               Positive     Developers looking to launch more affordable housing projects get an
                            (no tax for developer working on affordable housing)                              extension.
         Real Estate
                            Additional deduction of INR 0.15mn on affordable                      Positive         Offtake for affordable housing units will continue to see strong demand,
                            housing loan extended for March 2021                                                   positive for developers like Brigade/Markets like Bangalore. Will also benefit
                                                                                                                   companies like APL Apollo.

Sector                                         Budget Proposal                               Nature of Impact                                   Comments
                            Focus on promoting Made-in-India and growing                         Positive     This would encourage domestic manufacturers and market leaders with large
                            manufacturing; Raises customs duty on small                                       inhouse/backward integration in India like Polycab India and Finolex cables.
         Industrials
                            appliances from 10% to 20%; on refrigerator and AC
                            compressors increased from 10% to 12.5%

 The names of select companies have been mentioned in this slide for illustration purposes only. There is no guarantee that the budgetary proposals will have a positive impact on these companies as actual
 performance will depend on various other parameters including quality of management, etc.                                                                                                   18
Union Budget FY21: Sectoral Impact
Oil & Gas, Metals & Mining, Water: Neutral to Positive
          Sector                            Budget Proposals                                   Nature of Impact                                       Comments
                          Petroleum subsidy allocation of INR 388bn                                Neutral             At US$ 65/bbl, we est. gross under-recovery at INR 315bn for FY21E.
                                                                                                                       Allocation of INR 388bn to be utilized for carry forward from FY20 and
         Oil & Gas                                                                                                     FY21 gross under-recovery with carry forward of Q4 subsidy into next
                                                                                                                       year.
                          Removal of anti-dumping duty on PTA                                       Neutral            Negative impact of ~1% on EPS for RIL, IOC
                          Customs duty on very low sulphur fuel oil (VLSFO) cut                     Neutral            Negligible negative impact on GRM for refineries
                          from 10% to nil

                                            Budget Proposals                                   Nature of Impact
                          Customs duty on calcined petroleum coke reduced from                     Positive            Marginal positive for aluminium producers like Hindalco, NALCO, Vedanta
   Metals & Mining
                          10% to 7.5%

Sector                                         Budget Proposal                                Nature of Impact                                         Comments
                          Budgeted Rs103 trn towards National infrastructure                      Positive             Piped Water supply initiative will benefit Large Dia Pipe
                          Pipeline projects. Jal Jeevan Mission being a key project                                    manufacturer/suppliers like Welspun Corp
                          to provide piped water supply to all households (Rs 3.6
          Water
                          trn has been approved). Cities with a population of
                          over a million will be encouraged to meet this objective
                          during the current year itself. A budget of Rs115bn has
                          been allocated for FY21

 The names of select companies have been mentioned in this slide for illustration purposes only. There is no guarantee that the budgetary proposals will have a positive impact on these companies as
 actual performance will depend on various other parameters including quality of management, etc.
                                                                                                                                                                                                  19
Union Budget FY21: Sectoral Impact
Pharma: Neutral
Sector                                         Budget Proposal                 Nature of Impact                                                Comments
                             Healthcare expenditure allocation has been            Neutral                  Despite the 6% increase, healthcare expenditure as a proportion of total budgeted
                             increased by ~6% YoY to INR 675bn. This includes                               expenditure remained same YoY at 2.2%
                             INR 639bn in revenue expenditure and INR 11bn
                             in capital expenditure.
          Pharma             Ayushman Bharat allocation has been                   Neutral                  Given muted utilization for in FY20, we believe present allocation should cover the
                             maintained at INR 64bn vs revised estimate of                                  expenditure in FY21.
                             INR 32bn for FY20.
                             Customs duty on the imports of medical                Positive                 May encourage global players to invest in India
                             equipment keeping in view that these goods are
                             now being made significantly in India. The
                             proceed from this cess shall be used for creating
                             infrastructure for health services in the
                             aspirational districts.

Sector                                        Budget Proposal                          Nature of Impact                                     Comments
                             Budget 2020, the company is no longer required                Positive     We think IT companies like Persistent sys, KPIT tech are likely to increase dividend
         IT Services         to pay DDT (dividend distribution tax)                                     pay-outs to investors/consider Buybacks thus improving ROEs

Sector                                         Budget Proposal                         Nature of Impact                                      Comments
                             a) a simplified direct tax structure without                               We think this could increase near-term tax rate for Life insurers; and possibly
                             exemptions and deductions, and b) DDT                                      weigh on EV, particularly for insurers with high ULIPs; however medium-term
         Insurance           abolished and dividend income of Insurance               Marginal Negative impact seems limited with most insurers growing protection biz
                             companies to be taxed is likely to lead to an
                             increase in effective tax rate (ETR).

 The names of select companies have been mentioned in this slide for illustration purposes only. There is no guarantee that the budgetary proposals will have a positive impact on these companies as
 actual performance will depend on various other parameters including quality of management, etc.
                                                                                                                                                                                            20
Disclaimers & Risk Factors

  Investments in securities are subject to market risk and there is no assurance or guarantee of the objectives of the Portfolio being achieved or safety
  of corpus. Past performance does not guarantee future performance. Investors must keep in mind that the aforementioned statements/presentation
  cannot disclose all the risks and characteristics. Investors are requested to read and understand the investment strategy, and take into consideration
  all the risk factors including their financial condition, suitability to risk return profile, and the like and take professional advice before investing. Opinions
  expressed are our current opinions as of the date appearing on this material only.

  These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or
  regulation. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into
  possession of this document are required to inform themselves about, and to observe, any such restrictions

  We have reviewed the document though its accuracy or completeness cannot be guaranteed. Neither the company, nor any person connected
  with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their
  own independent professional advice. While we endeavor to update on a reasonable basis the information discussed in this material, there may be
  regulatory, compliance, or other reasons that prevent us from doing so. Investors and others are cautioned that any forward - looking statements are
  not predictions and may be subject to change without notice.

  Note:
  Benchmark of following strategies of Portfolio Management Services being provided by Kotak Mahindra Asset Management Company Ltd, with
  effect from July 29, 2019, were revised as follows:
     · In respect of Special Situations Value Portfolio, the Benchmark was revised from CNX 500 Index to India Value Index.
     All other terms and conditions of the aforesaid Strategies remain unchanged. This forms part of Disclosure Document of Portfolio Management
     Services being provided by Kotak Mahindra Asset Management Company Ltd, as amended from time to time.

  Statutory Details: Portfolio Manager: Kotak Mahindra Asset Management Company Ltd. SEBI Reg No: INP000000837- Registered Office: 27 BKC, C-27, G Block,
  Bandra Kurla Complex, Bandra (E), Mumbai - 400 051, Principal Place of Business: 2nd Floor, 12 BKC, Plot No. C-12, ‘G’ Block, Bandra Kurla Complex, Bandra East,
  Mumbai – 400 051,India. Address of correspondence:6th Floor Kotak Towers, Building No 21 Infinity Park, Off W. E. Highway, Gen A K. Vaidya Marg, Malad (E),
  Mumbai 400097. - Contact details:02266056825

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