If you see Budget 2019, there is a lot of incremental infrastructure related announcements and those execution will lead to a lot of order book building up for the small and midcap companies, says Sunil Subramaniam, MD & CEO, Sundaram Mutual. Excerpts from an interview with ETNOW.
The buyback norms that the government has provided is that listed companies should be liable to pay additional tax of 20% in case of buyback of shares. Currently, this is only applicable in the case for unlisted companies. Is this going to be a negative for those companies that have been trying to use this route as a to avoid DDT?
Yes, when you pay dividend, there is a DDT impact. By buyback, you are avoiding that tax. So the government has filled that loophole and made sure that buyback is equal to dividend payouts. So, now you will see that neutral buybacks will come down and dividend payouts which are much easier to implement will be back, instead of resorting to buybacks as a tax avoiding tool.
Both the Nifty and Sensex are down. True, there is no crazy selloff. However, markets are not enthused by the budget. If you want to take two-three things that they are negative about, it would be perhaps buybacks, the surcharge on the rich and lack of any major announcements. What is it that the markets are not liking?
Markets are not happy with the fact that the float of a lot of shares are going to go up from the 25% to 35%. Plus the fact that a lot more PSU disinvestment will come in now. Over the next 12 to 18 months, you will see a lot of supply. So, the market is worried now that existing companies valuations will get hit as supply will go up. So, that is one. Second reaction on the market front is because of the hype over the last one week over the budget being a very mega budget with the strong reform moves from government has been belied. This budget I would rate it actually about 7.5 on 10 because it has got lots of incremental good things but not that big bang mega announcement.
Do you think that even in this explanation that we are hearing right now from the finance minister, the focus is clear, The focus is on Bharat more than India. It is on pushing consumption in rural India and the whole host of welfare schemes that have spoken about. Is the new India about villages rather than urban India?
I will slightly differ from that to the extent that I feel the finance minister has done a very good job by not doing populism to boost consumption. Of course, she did mention it. The hike in petrol excise duty, hike in income tax over Rs 5 crore, import duty on gold — all that is for the balance sheet of the government. The tax you pay on your income, you want to see it as a slew of infrastructure developments and not direct populism like that insurance policy or giving away Rs 2,000.
It is a very balanced view that ultimately government spending in infrastructure will lead to consumption and not just directly putting money in the hands of the consumer and that is how they have aim to manage the fiscal.
I like the budget. There is no big bang big announcement which is going to suck away a lot of money. There are a whole lot of incremental and very positive things. For example FDI in aviation and insurance services sectors. For FPIs, they have eased a lot of KYC issues. Government is going to tap the international markets to borrow so that means they are not going to crow out the domestic investor by allowing PPP in railway infra.
All the immense land pockets that the railways has if they are going to put it into the pool where the public sector and private sector jointly will develop it and that is a huge boost for infrastructure.
The government has done a good job by spRead More – Source
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