PULSE TRACK
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Interest on CRR to be positive for the sector
RAILWAY BUDGET SPECIAL
Railway Budget 2007-08
Railway minister Lalu Prasad Yadav continues to guide the Indian Railways (IR) on a profitable growth path. Announcing his fourth budget for the IR today, he indicated that the capital expenditure (capex) binge of IR would continue. In a move to boost IR’s key revenue stream (ie freight), the minister also extended major concessions on the freight rate front. He also reduced the passenger fares in a bid to increase the passenger traffic. The other salient features of the Railway Budget 2007-08 are an impressive reduction in the operating cost of IR, significant policy shifts to turn around the loss-making businesses of the national carrier, continued freight rationalisation and an increase in the capex of IR to make the railways more competitive.
The major beneficiaries of these moves are likely to be Texmaco, Kalindee Rail Nirman Engineers (Kalindee Rail) and Stone India. A few days back, in our special note “Turnaround Express going strong”, dated February 22, 2007, we had mentioned how we expected companies like Hind Rectifiers, Simplex Casting, Stone India and Texmaco to show a healthy growth in their earnings on the back of the growing capex of IR.
Besides these companies, oil refiners, cement, steel and iron ore companies would benefit from the railway budget due to the reduction announced in the freight rates, though the impact on earnings is expected to be marginal.
SECTOR UPDATE
Information Technology
Policy tangles
The Indian information technology (IT) service companies have been demanding the extension of the prevailing tax exemptions on software technology park (STP) registered units under the Section 10A/10B of the Income Tax Act. As per the current guidelines, the tax exemptions for such units would cease to exist with effect from March 2009. But the industry associations are lobbying for the extension of the exemptions for another ten years in line with the proposed tax exemptions for the units located in the special economic zones (SEZs).
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