Is it good or bad Budget for market? Experts analyse

Uday Kotak of Kotak Mahindra Bank, too feels the Budget has addressed the need to boost investment in the country and changes the rules of tax treatment, by simplifying it. According to him, the one big problem that India has been facing is handling of cash.

Vallabh Bhanshali of Enam Securities sees it as a balanced Budget. “It is a good Budget given the fact that the economy is yet to take off,” he said.

Manish Chokhani of Enam Holdings said he did not expect a theatrical Budget, but it is definitely an extremely clever one, which gives more power to common man. And is of course away from ‘Mai Baap sarkar’ mentality.

R Shankar Raman of L&T feels one has to go through the detail first to understand whether the ‘mirage is real’.

Sanjay Dutt of Quantum Securities and Ajay Srivastava, CEO of Dimensions Consulting also shared their views on Union Budget 2015.

Here are excerpts from the interview. For entire discussion, watch accompanying videos.

Latha: Your initial thoughts, is this good for corporates? Corporate tax going to be reduced prospectively as well General Anti Avoidance Rule (GAAR) put out by two years and wealth tax abolished?Kela: It is a good Budget. It is very well balanced. There is a lot which is being done for the rural economy as well and this reduction of corporate taxation and the clarity, let me repeat the word clarity for the next four years, anyone who is investing in India whether it is a financial investor or whether it is a corporate investor know exactly the road map for what is being done and one thing which has happened which will enhance the PE multiple of India it is essentially really curbing the black money whether it was domestic or foreigner there are stringent steps which I could hear. Senthil: Your first reaction on the Budget?Mowat: The Budget is very positive, lots of detail in it. We have got our emphasis on kick-starting the economy with spending on infrastructure. We have clarity on the subsidy regime going forwards. We have got some of the ambiguity around taxation with postponing GAAR for two years. There is a lot in this Budget the people will like and as Modi was highlighting it is about giving us clarity over the next four years.Senthil: Would you say that this Budget has made easy to do business in India?Wadhwa: That is an important point. If you think about all the discussion pre-Budget focus was I do not think we are going to get big bang reform. I think even the Finance Minister said that the devil was going to be in detail and I dare say when we read the fine print there will be much more but ease of business in India, absolutely yes. Foreigners can invest in alternative investment funds (AIF). AIF taxes pass through foreign fund managers can relocate in India and do not have to worry about paying tax in India on either domestic income or global income. These are very significant changes; they are small but very important changes focusing on doing business in India.Anuj: Dream Budget would you say or too early to say that?Damani: I am wondering if it will be a big bang Budget, it doesn’t seem like that but it seemed like a big bold Budget. I would give the Finance Minister high marks for restructuring the corporate tax rates doing away with the wealth tax. However, one thing that surprised me is that FM did not suggest the disinvestment figure. I didn’t hear it anytime in the speech how much he proposes to disinvestment. Latha: Give us your first thoughts as a manufacturer, is 'Make in India' any easier and particularly I have got confirmation now from corporate lawyers that capital controls on equity have moved out of the Reserve Bank of India (RBI). Section 6 Foreign Exchange Management Act (FEMA) has been amended; this will mean I think that all these option pricing rules which were getting stuck at RBI is going out of the RBI's clutches. As a corporate do you think that this means fewer problems when you are raising kind of hybrid equity aboard?Raman: Never know because the ink is not dried yet so as they say the devil lies in the detail. We need to go through as to relief is it a mirage or is the relief real. However, I would be a great votary of easing the flow of technology and on the back of it capital into the country because these two are very important if you want to make 'Make in India' a success. So, my guess is that the intent is to make it easier and maybe the detail will confirm that. Latha: First thoughts, not looking like a dream Budget but an okay Budget?Bhanshali: It is a very good Budget given that the economy is yet to take off though the green shoots are visible all over and the fact that the need is for poor country. So it is a wonderful balance between looking after the poor, uplifting them and doing wonderful things for the sectors required which was infra, investment, ease of doing business and a better tax regime. It is a great Budget.

Latha: Do you think Make in India or Manufacture in India gets easier? There have been a lot of rules but the devil will lie in the detail in terms of easier-there was a rule where he said I am going to give initial exemption and replace it with regulations, you do not have to take permissions. Do you think startups are going to have it easier?Chokhani: Before I go down that path I just want to say that what we should not expect to see is a theatrical Budget because eventually you are also addressing parliament and you cannot be attracting a lighting rod. So, the way it is done is extremely clever and if you see the way the government has in a way restructured the whole of India, you are moving from a command and controlled economy to something which is pushing power down into the hands of the state and the citizens. At one end if you have seen the dismantling of the planning commission and the creation of Niti Aayog, devolution of power down to the states at the other end you are seeing the whole subsidy regime being dismantled and going down through what they call the Jan Aadhar system as well as direct benefits going into consumer hands. Your are putting more money back into consumer pockets by way of all the tax concessions which you got for the middle class and the other citizens, you are creating the safety net so you are basically telling people to grow up, become adults, take responsibility for your own actions and we will now not act as the Sarkar of the old era and in that sense it is the rebirth of the country in that format. From a Make in India perspective, a specific question you asked, what you want there will not really—the market exists over here and it were irritants in the way and the way you were treated and the way tax system for example was administered. Now, when you talk directionally of moving away from an exemption based system you create a more level playing field for people not having to run pillar to post to try and figure out what the law means and what the intention is and how the assessing officer is seeing it.From a private equity perspective if we see deferral of things like General Anti Avoidance Rule (GAAR) which for instance costs the whole industry, we used to pay insurance against withhold tax demands coming on us of the extent of six percent. In aggregate the industry has taken insurance of almost a billion dollars just to guard again something like this so that is a material cost which has gone out. To put a permanent establishment in India no longer you are going to be worried about things like that. You can bring in all the offshore centres which has gone away to Singapore and Mauritius onshore.So, from that perspective this is certainly a great thing to do. They have also talked of a very competitive tax system, coming in over the next four years admittedly but you can now plan for it. So, all in all if I were to suit back and take stock while you certainly miss the theatrical and dramatic announcements, directionally whatever one was looking for it is done very cleverly by use of smoke and mirrors.

Latha: First thoughts, will you buy something, not buy something after hearing the Budget out?Dutt: No, I won’t buy anything because in my opinion it is not really that good a Budget but it is a very good reform document, vision document on giving a broader view and a broader picture of what the government wants to do which are very positive things.Some of the negatives that are you are seeing taxes go up across the board, service tax, excise which obviously no one is happy about. We were just discussing allocations to public sector banks, those are not there. What actually is tad disturbing for me and I may be reading it wrong is this monetary policy committee being established and the public debt management office legislations coming up.So, if I read it correctly what I am trying to say is that you are trying to take away a lot of executive action as well as other power from the RBI in terms of monetary policy action and lot of other things. That is a little disturbing because what I have seen in the last 25 years is that something that has really held us together through all crisis has been a very strong and independent RBI. So if we are going to say that we are going to set up another bureaucratic committee as part of a new policy initiative that worries me.

Anuj: Over the next one month or so post this Budget, do you think the market would inch towards higher levels or would they see lower levels maybe correct 4-5 percent, could the Budget be catalyst for either of them?Srivastava: I think it will be correcting a little bit definitely in the next seven days or so and for the reason that there are a lot of expectations built around a couple of sectors has come down. One is the real estate, infrastructure sector. We are seeing a service tax input which will affect the cost of right across the board construction in the whole country. So net-net, I think we have lot more disappointment than pluses out of the Budget that is one.Number two is, it just doesn’t address the question of infrastructure, ‘make in India’ so called initiative and the local demand. So if you put all three together for the first time now, we will start to see impact of company valuations and fundamentals coming to the market more than liquidity. Expectations are over, the reality is now when the new cost comes to hit the real estate, infrastructure companies what happens to their earnings dynamics and that will be a negative. So my view is that I think for next seven-ten days or whatever the shorter duration, you should see a little bit of climb down to the market given the fundamentals and the valuation metrics now.