What the Budget does
- Steel melting scrap will be exempt from customs duty
- Excise duty reduction in select segments of automobile manufacturing
- Continuation of power sector reforms
- Coal regulator to be appointed
- Dividend tax paid by parent company allowed to be set off against the same paid by its subsidiary
Also read: How Budget affects your stocks
Impact on sector
- Reduction in customs duty on scrap will help steel manufacturers that use the electric arc furnace route for steel manufacturing lower their costs. On the other hand, it will be a negative for manufacturers that use the blast furnace route.
- If auto manufacturers pass on the reduced excise benefits in the form of lower prices, it will help spur demand for automobiles, which in turn will drive steel demand
- Increased investment in the power sector will also help boost demand for steel
- The proposed coal regulator will help ease the process of allocating coal blocks, a key raw material in the steel manufacturing process
Impact on companies
- Reduction in excise duties on automobiles will help companies that supply steel to auto makers. Key beneficiary would be Tata Steel
- Players that supply steel to the power equipment companies like SAIL and JSW Steel will benefit from increased investments in the power sector
- Better access to coal mines will be a positive for all the players that do not have their own captive mines
Powered by Equitymaster.com, an independent equity research initiative. Equitymaster is currently celebrating its 10th Anniversary. To know more about the special offers on its equity research subscription services, please click here
