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Budget 2009-10 Pre Disclosure Analysis Research Team | Posted On Saturday, June 13,2009, 05:47 PM

Budget 2009-10 Pre Disclosure Analysis



As you may be aware of the fact that the budget session will start on July 3rd. Before that decided to analyze and decode President's speech to both the house on June 4 and find out which sectors will be get most emphasis and which all companies stands to benefit most from those policies. This is the first part (Part-1) of our research and analysis. Readers are requested to share their opinion about the same.

President Pratibha Patil on June 4 unveiled the new government's blueprint that includes reviving the economy through more investments in sectors such as Infrastructure, Power, Disinvestment a plan for national security and a host of social welfare programmes. She was addressing a joint session of parliament, which met for the first time after the Lok Sabha elections brought back the Congress-led UPA to power.
President, Ms Pratibha Patil, pointed out that people have every right to own a part of the shares of public sector companies while the government retains majority shareholding and control.
Ms Patil said that the main concern of the Government would be to counter the effect of the global slowdown and ensure that the growth momentum of the economy is restored.
  • Listing, Divesting of Government holdings in public sector undertakings.
  • Investment- friendly regulatory and legal framework for public private partnership.
  • Policy changes to reorient subsidies.
  • Recapitalise bank to boost their financial position and the pensions sector will have a new regulator.
  •  Post offices will be leveraged to deliver more services.
  •  Focus on small enterprises, textiles, export etc.
  • Atleast 13,000 MW Addition every year envisaged.
  • Recognising that rural health institutions.
  • Autonomy in education through an independent regulatory authority.
  • SEZs: Land Acquisition and R&R Bills to be reintroduced.
  •  Infrastructure spending to be centerpiece of growth.
  •  Reforms in Coal sector
10 areas that would get top billing during UPA second term in office, these include internal security, growth in agriculture and manufacturing, public healthcare and education, governance reform and energy security.
Disinvestment in PSU
Publicly listed PSUs saw a revival of interest after the 2009 election verdict because disinvestment may unlock hidden wealth in those PSUs. The BSE PSU index raised 39.5% post-elections, beating the 24% surge in the BSE-500 and the 20 per cent rally in the Sensex in the same period. Expectations that the UPA Government will sell its stake in central PSUs contributed to the rise in stocks of government-owned companies.
Government-funded subsidy bill have swelled the fiscal deficit. With the economic slowdown impacting revenue, Divestment is clearly one way to raise funds to improve the fiscal deficit. The fiscal deficit for the year 2008-09 was a whopping Rs 3,30,000 crore, which was 21% of the total market capitalisation of the BSE PSU index. Though proceeds of divestment since 2007 have gone into the ‘National Investment Fund’, expectations are that fund will now help to fill the fiscal deficit.
IPOs from government owned companies could also help revive the IPO market and boost the stock market. Congress manifesto emphasised the need for divestment. PSUs, where the government stake is much higher than 51%, may be the first where stake sales will be pushed through. Stocks of PSUs with 92-99% government holdings such as National Mineral Development Corporation (NMDC), Minerals and Metals Trading Corporation (MMTC), Rashtriya Chemicals and FertilizersLtd (RCF) and Neyveli Lignit, were among the top gainers, with returns of 45% to 104%.
President Pratibha Patil on June 4, Declared that UPA government will give highest priority for Infrastructure spending. The government of India has planned infrastructure spending to the tune of $550 billion during 11th five year plan period from 2007 and 2008 to 2011 and 2012. Project like Bharat Nirman scheme aimed at strengthening the country's rural infrastructure including water supply, power, housing and roads, and proposed a `specific financing window' for the Rs 1,74,000-crore programme will help Infrastructure sector. Companies benefiting from UPA government infrastructure project both in the short-term and long-term include:
GMR Infra
GMR Infrastructure Company has gained from several infrastructure projects. GMR Infrastructure Ltd won the 181 km Hyderabad–Vijayawada highway project from Andhra Pradesh government to be executed on a (Toll) Build, Operate and Transfer basis through international competitive bidding process. GMR Infrastructure Ltd subsidiary GMR Kamalanga Energy has achieved coal-based thermal power project at Kamalanga Village in Dhenkanal District of Orissa for setting up 1,050 MW coal-based thermal power project in the state. GMR has developed several prestige projects like GMR Hyderabad International Airport Ltd and Delhi International Airport Pvt Ltd (DIAL) in record time.
GMR’s ability to perform and execute on time, experience in several projects and its competitiveness has helped it in getting several big projects. All these factors will continue it winning several other infrastructure projects from governments especially in South India.
The L&T stock had jumped 24.53% to Rs 1231.65 on Monday, 18 May 2009, expectations that the Congress-led UPA government will increase infrastructure spending to boost growth. L&T engineering and construction segment accounted for almost of Rs 70,300 crore. Order inflows for the coming year could arise in the form power projects especially from NTPC. Spill over projects from ONGC as well as airport projects in West Asia could be other areas.
L&T Infrastructure Development Projects, the company’s infrastructure arm, is currently considering a number of asset ownership related projects in the roads, ports and airport segment. While these projects could turn out to be slightly long gestation in nature, construction contracts arising out of the above development projects would also result in cash flows in the medium-term. L&T’s progress in thermal and nuclear power projects could also be less lucrative initially as a result of joint ventures/tie-ups and a possible aggressive bidding approach to make breakthroughs in bagging orders. L&T it can win the new infrastructure   project due to advances technology and aggressiveness .
Punj Lloyd
Punj Lloyd Group is a diversified global conglomerate providing Engineering & Construction services in Oil & Gas, Infrastructure and Petrochemicals, and with interests in Defence, Aviation, Marine and Upstream sectors with a turnover of US $2 billion.
In April Punj Lloyd announced three prestigious contracts worth Rs. 308 crore for the construction of eight stations from the Bangalore Metro Rail Corporation. The Group is currently constructing Singapore’s Mass Rail Transit (MRT) Downtown Line's Bay front station at the Marina Bay, and a section of the MRT Circle Line besides projects for Delhi Metro. Punk Lloyd also bagged Rs 264 crore contract to build Sikkim’s first Greenfield Airport Project. The contract will be Punj Lloyd’s first Greenfield airport project in India. It will boost the tourism infrastructure in Sikkim.
In Jan Punj Lloyd JV with Public Works Company Tripolisecured Rs 1,311.19 crore contracts for the execution of utilities in Souk Al Juma, Tripoli, Libya the contract is Punj Lloyd’s fourth project in Libya.
The huge fleet of equipment Punj Lloyd owns and vast experience in executing large projects give the company an edge over its competitors; this makes Punj Lloyd a front runner in Indian Infrastructure projects.
India is world's 6th largest energy consumer accounting for 3.4% of global energy consumption. Due to tremendous growth in its economy the demand for energy has grown at an average of 3.6% per annum over the past 30 years while 8% in the last 10 years. More than 50% of India's commercial energy demand is met through the country's huge coal reserves. About 76% of the electricity produced in India is generated by thermal power plants, 21% by hydroelectric power plants and 4% by nuclear power plants. The country has invested heavily in recent years on renewable sources of energy such as wind energy.
In March 2009, the power generation capacity of India was at 147,000 MW while the per capita power consumption stood at 612 kWH. The per capita power consumption is still very low compared to China and US. The government of Indian has set an ambitious target to add approximately 78,000 MW of installed generation capacity by 2012. The total demand for electricity in India is expected to cross 950,000 MW by year 2030.
Electricity losses in India during transmission and distribution (T&D) are very high and vary between 30 to 45%. In the year 2004-05, electricity demand outstripped supply by 7-11%. Due to shortage of electricity, power cuts are common all over India and this has adversely effected the country's economic growth. With the new emphasis on T&D and its privatization, companies are going to benefit for such policies.
National Thermal Power Corporation (NTPC) is India's largest power company with a current generating capacity of 30,144 MW and has embarked on plans to become a 75,000 MW company by 2017.
NTPC would invest Rs 17,700 crore in 2009. The company with its JVs and subsidiaries will add 3300 MW during year 2010. The company will commission 4 power projects this year — Sipat Stage I (2x660 MW), Dadri Stage II (2x490 MW), Kahalgaon Stage II and Korba Stage-III, 500 MW each. NTPC is currently working on various new projects which will together add a new capacity of 18,000 MW electricity. The new capacities, being built across the country, are at present in different stages of construction. The future of NTPC looks good with its exciting and new projects that will generate income for coming year. UPA
Tata Power
The Tata Power Company (L) is India's largest private sector power utility with an installed generation capacity of over 2300 MW. The company is a pioneer in the Indian power sector. Tata Power has a presence in all the segments of the power sector viz generation (thermal, hydro, solar, wind and liquid fuel), transmission and distribution.
Tata Power Company plans to build gas-based power plants and is in talks with GAIL India Ltd. The Company is actively pursuing growth & expansion plans to meet ever increasing power requirements. Expansion plans include the 4000 MW Ultra Mega Power Project at Mundra in Gujarat and the 1000 MW Thermal Power Project at Maithon (in artnership with DVC) Jharkhand and projects in Maharashtra, Jharkhand, Orissa, and West Bengal under development. Tata Power will benefit tremendously with the privatization of T&D across India.
Power Grid Corporation
POWER GRID, a Public Sector Enterprise, is one of the largest transmission utilities in the world. Power grid wheels around 45% of the total power generated in the country on its transmission network. Power grid has a Pan India presence with around 71,500 Circuit Km of Transmission network and 120 nos. of EHVAC & HVDC sub-stations with a total transformation ability of 79,500 MVA. Power grid is also diversified into Telecom business and established a telecom network of more than 20,000 Km across the country.
Power grid has sign an agreement with Punjab State Electricity worth Rs. 1033 Crore for building transmission lines. Power grid to investment Rs20, 000 crore during the 11th Plan period to provide transmission systems to 4 ultra mega power projects (UMPPs) of 4,000MW each.
This is part of Power total investment of Rs55, 000 crore for laying new transmission lines for various projects, including four UMPPs and others to be commissioned in the 12th Plan period (2012-17).
UPA government plan to give important Power sector will benefit Power Grid since it is India’s largest power transmission industry.
Suzlon Energy
Suzlon is world’s 5th largest wind power supplier, with a market share of 10.5% while it is the biggest in India for nine consecutive years, maintaining over 50% market. It has operations spread across 21 countries including those in Americas, Asia, Australia and Europe.
Suzlon Energy (Tianjin) Ltd, China, a wholly owned subsidiary of Suzlon has entered into an agreement with Inner Mongolia North Longyuan Wind Power Corporation, for 100 MW of wind turbine capacity. Suzlon Energy, Australian subsidiary signs agreement with AGL Energy Limited for supply of 54 units of Suzlon's S88-2. Suzlon had won a project from government of Gujarat for developing wind power projects of up to 1,500 MW in the Kutch-Saurashtra region of Gujarat. Suzlon Wind Energy Corporation, the North America arm of Suzlon. Energy Limited has signed a repeat order with Duke Energy, of Charlotte, North Carolina, on April 1, 2009, to provide 20 units of the S88-2.1 megawatt wind turbine. With this order, the total supply portfolio to Duke Energy increases to 130MW.
Clean energy is the new mantra globally and also that of Indian government. Suzlon is well placed to exploit these new opportunities and consolidate its position globally.
Part 2 of this article will be published very soon. For more articles on equities please Click Here. Also check out our new section on Daily Stock Tips for Intraday trading and Short- & Long-term investments.



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