The likely beneficiaries of the second stimulus package
Package focuses on select sectors.
--------------------------------------------------------------------------------
The focus on funding for road and port projects may also have spillover gains
for the logistics sector, which has been grappling with dwindling volumes at
the ports.
--------------------------------------------------------------------------------
BL Research Bureau
Chennai, Jan. 3 If the Cenvat concession and interest rate cuts of the first
stimulus aimed at trimming costs for India Inc as a whole, the second one
singles out select sectors for its munificence.
It promises lower borrowing costs for large infrastructure companies through
the ECB route and paves the way for financial closure of stalled projects. It
also offers incentives for commercial vehicle makers and the logistics sector,
while raising the barriers of protection for cement makers. Here is a listing
of possible beneficiaries.
Freeing up funds
For the infrastructure sector, moves such as the removal of the ECB ceiling,
aggressive rate cuts and greater borrowing powers to IIFCL may infuse liquidity
and temper the cost to borrowing. It may also speed up financial closure for
infrastructure projects that are struggling to achieve financial closure.
Players such as Larsen & Toubro, Hindustan Construction and Maytas
Infrastructures, key bidders in road projects, may be the possible
beneficiaries.
While the CRR cut will lower the cost of funds for banks, the package also
takes care to open up additional avenues for fund-raising by NBFCs. NBFCs
engaged in infrastructure funding such as IDFC, REC and Power Finance
Corporation, as also those that lend to the transport sector, may be able to
obtain easier access to funds.
On the real estate front, the most significant incentive is the green signal
given to realty developers to raise ECBs for developing integrated townships; a
ban on raising funds for such townships was imposed in May 2007. DLF, Ansal
Properties & Infrastructure and Parsvnath Developers that have plans in this
direction may reap the benefits of this move.
Spillover for logistics
The focus on funding for road and port projects may also have spillover gains
for the logistics sector, which has been grappling with dwindling volumes at
the ports. Potential beneficiaries would be companies in the container rail
space such as Container Corporation of India and Gateway Distriparks, besides
players such as Allcargo Global, Sical Logistics and Mundra Port and SEZ. The
sector may benefit from the easing of pre-shipment and post-shipment credit
norms. The EXIM Bank has obtained a Rs 5000-crore line of credit from the RBI
to provide credit to domestic exporters at competitive rates.
Inventory relief for CVs
Commercial vehicle makers have been dogged by steadily sliding sales and an
inventory pile-up in recent months. The latest stimulus package tries to
address this by offering an accelerated depreciation of 50 per cent for
commercial vehicles purchased up to March 31, 2009. While availability of
financing for purchases will hold the key to actually reviving vehicle demand,
the accelerated depreciation benefits may push buyers to expedite purchase
decisions.
This could help clear inventories for CV makers such as Ashok Leyland, Tata
Motors and Escorts. The financing problem has been addressed by asking PSU
banks to provide a line of credit to NBFCs (such as Sundaram Finance and
Shriram Finance) for the purchase of commercial vehicles.
The Government has raised the barriers of protection for the domestic cement
industry and allowed greater pricing power, by re-imposing countervailing duty
(CVD) and Special CVD on cement imports.
Though the volume of imports has not been very large after the scrapping of
import duty last year, cement players in the surplus northern region have been
threatened by the shipments from Pakistan. Ambuja Cements, ACC, Shree Cement
and JK Lakshmi Cement may be possible beneficiaries from this move.
http://www.thehindubusinessline.com/2009/01/04/stories/2009010451340100.htm
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