Stimulus package - beneficiaries

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.