#BudgetThinkTank | Watch top industry voices discuss what to expect from Budget 2024. #NDTVProfitLive #BudgetWithNDTVProfit
Watch them in conversation with Niraj Shah, Samina Nalwala and Tamanna Inamdar.
Watch them in conversation with Niraj Shah, Samina Nalwala and Tamanna Inamdar.
Category
🗞
NewsTranscript
00:00♪
00:05♪
00:10♪
00:15♪
00:20♪
00:25♪
00:30♪
00:35♪
00:40♪
00:45♪
00:50♪
00:55♪
01:00♪
01:05♪
01:10♪
01:15♪
01:20♪
01:25♪
01:30♪
01:35♪
01:40♪
01:45♪
01:50♪
01:55♪
02:00♪
02:05♪
02:10♪
02:15♪
02:20♪
02:35♪
02:40♪
02:45♪
02:49Hello and welcome to Budget Countdown.
02:51We've got two trading days to go
02:53before we go into the budget with a big bang.
02:56And from what it looks like,
02:57a number of sectors are looking very excited
03:00in anticipation of big announcements in this one.
03:03And particularly has more significance
03:04than the others that we've seen.
03:06And it's also the seventh budget of the finance minister.
03:09Yeah, and a crucial one
03:11because it's happening at the start of the third term
03:14and at a point of time
03:16when the government has maths in its favour
03:19but also has some added responsibilities of state CAPEX
03:23and maybe some bit of consumption focus
03:28needed to be attended to.
03:30So it's an interesting mix.
03:32But the math is clearly in the government's favour.
03:35So it'll be interesting to see how they utilise the math.
03:37The question I think is that
03:39is this budget going to show any kind of response at all
03:42to the election results
03:44where it was not exactly what the ruling party would have wanted?
03:49Are they going to interpret that as a further push for welfarism?
03:53Anyway, let me just tell you what we're doing,
03:55all three of us are doing here on this show today.
03:57So we're going to speak to the NDTV Profit Think Tank.
04:00This is our collective of great minds, voices
04:04on what to expect from the budget.
04:06And all of these great thinkers will be with us on the budget day as well.
04:11So we thought it best to sort of set the stage with them,
04:14see what they expect, what they're saying
04:16and then we can tally up on budget day
04:18to what has really been announced.
04:20So let me introduce who we'll be speaking to today
04:23and the members of our esteemed Think Tank,
04:25A. Balasubramaniam, MD and CEO, Aditya Birla-Sunlight with us.
04:29We'll be speaking with Pranav Saita,
04:31Partner and National Leader of International Tax and Transaction Services at EY India.
04:35Manish Dangi, CEO and Founder at Mosaic Asset Management
04:39will be also giving us his views
04:42and of course, we will be speaking with others as well on the show.
04:48So let me begin actually with your take, A. Bala.
04:53And you know, let's start from the market's point of view.
04:57Is the one big fear any kind of tinkering with capital tax?
05:02Because all things considered…
05:04Can you hear me? Can you hear me?
05:08I don't think, I don't think A. Bala can hear me.
05:13Alright. So let me try and get him on for a second
05:17and then let me come to Mr. Pranav Saita on I think the big question on top of mind.
05:21If the push and the ask is to put more money in the hands of people,
05:25is there any chance that they would try and tinker with personal taxes?
05:30Do you think that they will succumb maybe to the temptation of capital gains tax?
05:34Does that seem in the realm of possibility with what you're pencilling in, Mr. Saita?
05:40So, yes, on the expenditure side, I do think there will be a push towards consumption,
05:47towards more revenue expenditure of the government,
05:50a little more focus on revenue expenditure of the government.
05:53Then CAPEX has been for the last few years.
05:56But I don't think on the revenue generation side, from the taxation standpoint,
06:01I don't expect any major tinkering with the capital gains tax regime.
06:06I do feel on the personal tax side, which was the other question,
06:10I do feel there'll be some more money left in the hands of consumers,
06:14whether it is increasing the threshold limits for individual taxation across the spectrum,
06:20or whether it is in terms of a higher standard deduction for salary taxpayers.
06:25So I do feel some more money in the hands of personal income taxpayers
06:30so that there is a consumption push and it helps tackle inflation to these guys.
06:35And also, I do feel that the capital gains tax regime will be kept by and large stable.
06:41I wouldn't be completely surprised if on the short term capital gains tax,
06:45there is some tinkering, whether it is in terms of increase in the rate or increase in the period of holding.
06:51But largely for long term capital gains tax, I don't anticipate any major tinkering at all.
06:57Okay. Manish Dangi, let's start with that.
07:02The point that Mr. Pranav Saita made, is that a relief or do you anticipate,
07:07I mean, is the market working with an estimate of some tinkering in capital gains?
07:11And if it doesn't happen, it's a relief or is it a tape that is played nearly every single time ahead of budget
07:18and therefore not really that important?
07:21No, it's the thing whose time will someday come.
07:25So it's just the train coming from the other side and it will hit you someday.
07:33It will more or less certainly hit you in this term of the Modi government.
07:39It is not a local thing. It's a global consensus to tax the rich.
07:46And therefore, you know, would come but very likely given the mandate and, you know,
07:53the priorities that may have changed for this government given relatively weaker mandate,
07:58I would say, I would agree with the gentleman that, you know, it may not come.
08:02Some form of harmonization in terms of, you know, various asset classes,
08:08having different, different tenor for capital gain, long-term capital gain, you know,
08:13could collapse into just one, which is, could be two years.
08:16So that could come, but, and of course, short-term capital gain,
08:19but these are all sort of pure speculation, no one knows.
08:22This is, I'm very certain on this that the capital gains, okay, pretty much all,
08:29will actually, will eventually get aligned, will align with what Europe does instead of what US does.
08:34But again, there is a good news in terms of Trump likely winning and,
08:38which is what markets are cheering in US also and, you know,
08:42therefore it may get postponed by another four years until the next time the dams come.
08:47Hey Bala, you want to comment on that too?
08:49Do you feel like while they may not tinker with capital gains in a big way,
08:53arbitrage funds, which is a very specific product offering, may see some tinkering?
08:58And the reason I ask you this, because there is a definite need to shore up deposits for banks
09:04and fixed deposits have been struggling largely after debt taxation changed and arbitrage became popular.
09:10On contrary, we have been making a big check that taxation,
09:16which was existing before in the fixed income product should come back.
09:21And given the fact that India needs vibrant corporate bond market in India,
09:28and so far equity market has been helping the corporates to raise money at ease,
09:34a similar situation should be created as far as the bond market is concerned as well.
09:39So that's something we have made a representation to our minister of finance,
09:43that in order to develop a very vibrant capital market on the bond market side,
09:48we must bring back the taxation, which was existing before for the fixed income schemes.
09:53And given the fact that mutual funds can create a huge impact in development of the bond market as well as in the past.
09:59As for the arbitrage fund concerns, I think from a government point of view, it's not an easy decision.
10:06Given the fact arbitrage fund together, collectively, all mutual put together,
10:13will be managing close to about 1 lakh crores.
10:16And we provide relatively better security transaction tax for the government.
10:22Because the transaction, more the transaction happens, it provides actually a secure transaction tax.
10:27From the government point of view, by removing it, what would they gain?
10:33The gain probably will not be anything significant.
10:36And today, whatever has been done, arbitrage funds have been providing the much needed liquidity to the market.
10:43And second, it also has been ensuring that the rate of carry forward is not very high,
10:50given the fact that the arbitrage funds have been primarily participating between the spot and the future.
10:57On top of it, revenue collections coming from the arbitrage fund from the government point of view is also quite significant.
11:03Therefore, I don't think they will tinker with arbitrage fund, because it serves many purposes,
11:08which is for the stability of the market as well as for the government taxation point of view.
11:12So, as far as the fixed income concerns, my one belief is that we will see that coming.
11:16As some of the others were mentioning or Manish was mentioning, there is a high probability,
11:21what the French minister has been often saying, there's a lot of confusion in terms of tax rates.
11:26It should be easy to understand.
11:28If you wake up in the middle of the night, we can give what is the tax applicable for various instruments.
11:33And therefore, they want to bring in some kind of commonality.
11:36There is a high probability all the tax rates get aligned either all in one or all in two or in three.
11:42When I mean all in one, it's a capital gain tax for equity is one, real estate is two, and other asset classes is three.
11:52Therefore, there is a high probability they may get these things aligned as a single period kind of things.
11:58Okay, so that might not necessarily be seen as a positive immediately for the markets that day.
12:03But then let's sort of set the context of what are the key markers that everyone's looking for in this budget.
12:11And we've tried to simplify it and we'll put that out for our viewers and of course, ask our think tank about it.
12:16Number one, are we going to see a big push for rural India?
12:20I think that's a no brainer in terms of a question because you need those rural incomes, bottom of the pyramid incomes,
12:27just broadly more than rural to even come up to speed.
12:30This sort of RBI bonanza that the government has got, is that going to be pushed towards consumption?
12:37Is that going to be the priority or will it be capex?
12:40I think we've talked about the capital gains question in some detail.
12:44Will that be restructured?
12:46The consensus so far seems to be that yes, you might see something through the term, not necessarily in this budget.
12:52The other point that if you want to push manufacturing, will you double down on PLI schemes?
12:58Is it going to be more of the same because they seem to have worked to some extent?
13:02And of course, will there be relief for taxpayers?
13:06And will all of that once again, be pushed to the new tax regime?
13:10I think those are some of the key points.
13:12Let me just get a view on point number one first on the push for rural India.
13:17Manish Sanghi, I think this is one part where or one point where the finance minister might surprise by doing things at her own pace.
13:26And really not feeling that pressure to show like a lot is being done for the rural voters at the end of it.
13:38Do you really bother too much about those headlines coming out that big push for rural India?
13:42Do you think that we're misreading this?
13:46So there are two things here.
13:48One, voter isn't a constituency in this budget.
13:53You've sort of gone past that point already.
13:56You have elections coming.
13:58Manish, the reason I ask is two big state elections coming, both agrarian states.
14:03I know, I know, I know.
14:04I'm getting there.
14:05I know that.
14:06So I have two parts to it.
14:07But a better way to address this is to do what, let's say, Maharashtra government is doing.
14:13You know, so launching a ladla bacha or ladli behna or such like scheme.
14:21So India is pivoting from actually central government doing largest to now central government sort of on lending to state governments.
14:35And they in turn actually addressing the specific need of their constituency.
14:40So I guess, you know, what budget would see is, would see it as that, you know, maybe a lot of loans being advanced to many governments.
14:49You know, we'll discuss about what Andhra and Bihar package could look like.
14:53You know, some assistance to Maharashtra government to actually fund, you know, some of the schemes and ambitious schemes that they want to launch and such like.
15:03For rural India, what exactly and directly that you could do?
15:07This government does not believe in except, you know, through subsidy and stuff like that.
15:12It's only through Kisan that, you know, you could actually distribute some largest.
15:17So could that number go up?
15:20Totally possible from 6000 to 7500.
15:23I thought of this in the January speech, it should have happened, but it didn't happen.
15:27So I'm not very certain that the bounty that government has, it's about 160,000 crore, a lakh crore extra from RBI and rest 50-60,000 crore coming in from better run rate of tax collections last year and this year.
15:43You know, that bounty will rather get distributed and other things that we should discuss later.
15:49Purely from rural standpoint, you know, really don't know exactly how and in what form, you know, can this be distributed, given the current methodologies that the government employs.
15:59You know, Manish, make a very important point.
16:01Sorry, just to follow up there.
16:03The dole outs to state, I mean, I think this government seems to be following a model that, you know, the CAPEX as well in some portion will be done by the states and therefore give interest free loans to states as opposed to just giving a dole out to states.
16:17And part two is the thought, therefore, that whatever the state does in terms of largesse is not going to impact state elections as much, so rather not go down that route.
16:29So that's part one.
16:30But part two also, the CAPEX uptick, will that also be done by states as opposed to doing a large number because half of the FISC or nearly half of the FISC has passed?
16:42How much can you give more to an economy so that the economy can even digest it well?
16:47So, you know, look, you know, Indian government is not, and I made this point many times, even on your channel, that, you know, it's not constrained for money, but constrained for the capacity to spend.
16:58Okay.
16:59You know, outside of just general transfers to people at large, you know, frankly, there are limited ways that the Indian government can spend.
17:07Especially for the fact that, you know, CAG audits it once you've spent.
17:11So I guess states have better capacity.
17:14I think the Modi government realizes this, and which is why you have right now two major projects, you know, both in Andhra as well as Bihar.
17:22The blueprint is likely ready.
17:24They may have submitted it as to how they want this money to be spent.
17:28In Andhra, certainly because of Amravati, you know, a very, very large expenditure is planned.
17:33So I guess a CapEx push, plus actually satisfying your partner, it comes in the form of, you know, government giving large loans, likely 25,000, 30,000 crore, maybe more, to these states to actually fund to do a lot of infrastructure build.
17:51That's the likely path, you know, how government of India actually uses this 160,000 crore bounty.
18:00So you will actually in the end see in the budget that there is a bump up in the CapEx spend.
18:05A large part of it is not because Indian government is actually spending a lot of money, but is actually on lending to state government to, one, facilitate this, whatever, you know, investments that they're making.
18:19Plus also, you know, some of the governments, you know, who could potentially use this for a dole outs.
18:25Pranav, we got your view on personal tax, but across industry, one of the key ask is to extend the Sunset Clause, which is a corporate tax rate of 15% for new manufacturing facilities.
18:37If India has to become the manufacturing hub, and extensively we've talked about how private CapEx needs to pick up, do you feel like an extension of the Sunset Clause is very likely or almost a given in this budget?
18:50Pranav Sethia, that was for you.
18:52Yeah, so I do not think so. The government seems very determined.
18:57If you're talking of the 15% plus surcharge sales, which adds up to about 17% corporate tax, which is a concessional tax rate for new manufacturing companies.
19:06I do not think they are inclined to extend that.
19:09Had they been inclined to extend that, I think it would have been done in the interim budget.
19:16A lot of Sunset provisions they did extend during the interim budget itself.
19:21This one they did not. And based on our interactions, they seem very, very clear that they do not want to extend this 17% concessional manufacturing company tax rate.
19:31Yes, I do expect that there will be some form of flip to the manufacturing sector, particularly private CapEx is something that needs some push for sure.
19:43So I do expect things like addressing the inverted duty structure to whatever extent they can.
19:48PLI will get a little more push. MSME financing will probably get some more push.
19:54And I do feel, therefore, that private CapEx will be one of the things on the government's agenda.
20:00On your previous question, actually on rural, I do feel that on agri-infra side, both logistics and productivity push is something that they might invest in.
20:11And I do feel that housing in the rural sector is also something that they might really look at.
20:19So some form of rural push, I would expect in this budget as well.
20:24Now, the rural push is one bit, consumption is one bit and often, you know, we end up conflating it all in one huge concept.
20:33But the fact is that if you want to increase consumption, there are several ways to do it.
20:37Either you increase incomes or you reduce taxes and payouts.
20:42And the big hit is GST, which the budget cannot really do. It's not in their purview.
20:46So let's come to that question, Ebala. And let me come to you on that.
20:50How crucial is this consumption story? Because when we're speaking to large FMCG companies, they're talking about green shoots, turnaround, but saying, hey, we need a bigger boost.
21:00Just going with the flow is not going to help.
21:03In your view, what can the government do and what is the finance minister likely to do?
21:08Consumption is the large component of the economy, there's absolutely no doubt.
21:14And therefore, it needs special attention. But that attention cannot be given by way of giving incentive to the FMCG companies and so on and so forth.
21:23It can only help in increasing the demand coming from the people who are largely the consumers by way of giving more money in the hands of people.
21:31Therefore, one of the options the government may consider is increasing the tax slab.
21:35Currently, up to 7 lakh rupees, you don't pay any tax. And then above that, there are tax slabs.
21:40Therefore, there is a high probability they may treat the tax slab structures.
21:45Therefore, say up to 10 lakh rupees, you'll have more money in your hand.
21:51And given the fact that the need for spending at every household has been rising, whether it is for home furnishing or buying a home and so on and so forth.
22:01So lifestyle is changing. Therefore, the applies also the middle class income levels are also have gradually rising, more people getting into the employment side.
22:10So therefore, there's a high probability the tax labs would undergo a change.
22:15As a result of changing the tax slab, it will probably have an impact across the taxpayers.
22:20Therefore, the consumption can get boosted. That's one.
22:23Second is earlier they talked about rural.
22:26Well, of course, rural income is dependent on agriculture.
22:29And there has been off late, the government has been spending more on infrastructure building in rural India,
22:36especially in the renewable energy.
22:39Solar energy is now being the focus, area of focus for rural India.
22:44Every household in rural India can avail the benefit from the government of subsidies and set up your own panel of, say, what do you call the solar energy panel.
22:58Therefore, whatever you consume, you consume and rest you give it to the grid that is being set up by the government of India.
23:03So they get additional income.
23:05So I think the focus that they have been having that increase in the income level for agriculture is in the country would be the focus.
23:10Not necessarily it has to come in the form of increasing MSP, not necessarily it has to come in the form of other subsidies that we provide, but they already provided enough.
23:17Therefore, there won't be much room for that.
23:20But definitely they can increase the activities surrounding the rural India, which will, of course, provide employment, will also give additional income and so on and so forth.
23:28And including the canal development, I think water resource management has been one of the big areas of focus.
23:33The government has not spent enough spending on this area, which will ultimately benefit the rural economy as well as the agricultural economy.
23:40Therefore, some bit of increase allocation could come on the CAPEX side on this side as well.
23:45If you look at it on an overall basis, definitely the government has managed to mention that there is a good leg room that is available for the government on the fiscal side.
23:54Even as we move forward, there is a high probability, increased compliance on tax payables will keep increasing.
24:02I will not be surprised, the GST collections will not only cross two, it will probably get close to about two lakhs per month it can become.
24:10Therefore, on an overall basis, they will have enough leg room for them to spend money by cutting tax rates rather than doing anything else.
24:19Okay, so maybe cutting tax rates, maybe making it great for the lower middle income class or the middle income class as well to have some more money.
24:28Actually, speaking of tax rates, Mr. Setha, can I come to you?
24:31One need, dire need to attract global manufacturers with even more vigor.
24:37We are doing well on the high tech front, not as much on the low tech front.
24:40And one of the views that is coming in is that tariffs are not predictable, tax rates not predictable, and global manufacturers don't like that.
24:48Can something be done in this budget print to make it more predictable, so that we can attract low tech jobs, which are more job generating, textiles, toys, what have you?
25:00Right, so I think by and large, this government's hallmark has been a fair degree of stability, predictability in the tax laws, particularly on the direct tax side, but also to a large extent on the indirect tax side.
25:17I do feel that some of the inverted duty structure piece might get addressed.
25:22But other than that, from the indirect tax side, we do not anticipate any major steps that would change this particular pattern of stability.
25:35I do feel, however, that in terms of some of the other points that got discussed.
25:42Yes, in terms of skilling, demographic, rural, there might be some spend around that.
25:47And to give more opportunities from an employment generation standpoint, some incentives could be expected, but not particularly in the indirect tax regime, as I see it right now, at least not through this budget.
26:01Well, Manish, I am going to take that question of Neeraj and extend it into the other complaint a lot of global companies have.
26:10When they come into India, the cost of logistics are very high.
26:14So globally, cost of logistics are 10-12%, India is anywhere in that 14-15% range.
26:19And we have seen over the last couple of months, the focus of the government or the focus of investors has been logistics, right?
26:27Aviation, railways, roads.
26:30Do you feel like, and this is going a little beyond the budget, if you're buying India for the next three years, would you still stick with the same theme of road, rail and highways?
26:39One, it's improved a lot in terms of our ranking.
26:47Two, Rome wasn't built in a day, so it takes time.
26:51Three, one very, very big achievement of Modi, one and two, is to pivot India to build East Asia-like infrastructure.
27:00And I think that is one of those very, very big successes.
27:05And I think this budget next and a budget after that, what will succeed for a politician, he must go after it over and over again.
27:14So I think that will continue.
27:17I think our roads have improved quite sharply.
27:21Ports are actually beginning to improve, capacity has risen dramatically.
27:24Railways, despite humongous investments, the quality as well as the capacity hasn't sort of improved as much.
27:32Of course, water, sanitation and a few other things at margin have grown, but nothing close to the dazzling growth that you've seen in the road infrastructure.
27:42So I think if we were to some of the other infrastructures, you know, could actually improve both the life of a household, but also, of course…
27:53Manish, while this is sounding like a very holistic, qualitative answer, yes, India first and we are all here for it, our civic sense needs some help.
28:03But that aside, what I was trying to understand from you is money to be made over the next three years in these sectors.
28:09Is this still a theme that could create significant wealth?
28:12I agree, I agree.
28:14You know, anything, what you make money from is either valuation gains or earning gains.
28:21I guess it's very likely because of the push in these sectors, the earnings will grow.
28:26But as you see in many of these sectors, they are actually valued at 100x of the, you know, two year out earning, one year out earning, you know, difficult to make money in, you know, something very, very expensive.
28:38Even the underlying sector or company do very well.
28:41So the answer is not straightforward.
28:43But I guess, you know, the corporates will do very well in these segments in next couple of years.
28:47Okay, Ravi Dharamshree has joined the party.
28:49He is founder and CIO at ValueQuest Investment Advisors.
28:53Ravi, great to have you on.
28:55So once again, for those who have joined in, this is our think tank and of course, Manish Sabharwal as well, who you will see with their views on budget days on NDTV Profit.
29:06So we're trying to sort of understand ahead of the budget what they want and then we can tally up whether it's what we saw or not.
29:12So, Ravi, the quick question of why are we seeing nervousness in the market?
29:16So let me come to the here and now.
29:18We have a couple of trading sessions left before the budget.
29:21And there seems to be a sense of maybe hedging bets.
29:27Is there a concern that there could be something adverse coming in on how equities are taxed or maybe not enough to cheer on the markets further?
29:36I think we might be reading too much into a couple of days moment from the perspective of what holds in budget.
29:44I think the mere fact that we haven't corrected in a significant way for four years and the valuations were running high is good enough reason for the market to take a step back.
29:54It's just that going into a big event and we haven't corrected, I guess that in itself is reason enough for markets to take some money off the table.
30:04So I don't think we should read too much into it from the perspective of what's coming in budget.
30:10Okay. So, Ravi, to your mind, what is coming in the budget?
30:15What is the one thing that you are watching out for, which you believe is a near certainty capital markets perspective?
30:21So from the perspective of where we are in the economic cycle, there are two ways to look at it, what's coming and what should come.
30:30What I would like to see is that the equity as an asset class should continue to be favored.
30:36Yes, we are facing some challenges on the banking deposit side and some incentivization might be required, but it should not be at the expense of the equity markets is what I feel.
30:45Secondly, I think the slight tilt away from CapEx oriented sectors towards consumption oriented sector is what the monitorable is for me.
30:54How hard is that turn the government takes is something that I'll monitor because what the analysis of the election outcome and the upcoming state election is that the government, there is distress in the rural areas and that distress needs to be addressed.
31:12So just doing supply side reforms and teaching people to fish is not going to work. There is a need to give a little bit of fish.
31:19So how hard is that turn? Is it at the expense of fiscal discipline or is it something that the higher tax buoyancy and the RBI dividend can take care of?
31:30If that is the case, then I think the middle path would be a great outcome for the market.
31:36Bala, I'll come to you as well on this. And while the list of needs, wants is extensive, tell me what is non-negotiable, what should not happen in this budget?
31:47Definitely, the going is good in every, I generally call it as all cylinders are firing on the economy part of it, whether it is robust tax collection, whether it is robust, vibrant stock market.
32:02And Indian, I think we would have never dreamt that they will rise equity capital from the market as so easily.
32:11And today, it's available and abundant. So that's something is the reflection of the optimism, reflection of conviction that everyone holds on the Indian economy.
32:20I think, which essentially has come on the back of stable policy, predictable and ending with a very stable interest rate regime.
32:28And therefore, what should not be there is more cutting down some of the expenditures and increase the subsidies and so on and so forth.
32:41I think that should not be coming in because the government so far, the last two terms have never done anything, which is more like a waste when it comes to the question of expenditure.
32:50So most of the expenditure has been more productive in nature and that must continue.
32:56And though there has been a wider discussion about because of state elections and so on and so forth, they would probably take the route of giving more freebies.
33:05I think this expectation always comes, but this government again and again proven that they don't take that path.
33:11They'll probably take the path of driving the economic growth to the next level and working towards the Indian economy.
33:17I think that should be the focus even in the budget.
33:21Agreed and I get that point, I agree completely that time and again the government is surprised in that sense on the positive.
33:29Positive and seen from the view of capital markets that they haven't given into temptations of fiscal profligacy or populism, etc.
33:38But one thing to watch this time and I'm just going to quickly come to Manish on this question.
33:43Will this be a key factor to see how much of allocation to projects which big allies or important allies want?
33:50So how much goes towards an Amravati? How much does Bihar get? Because these are also key allies, right?
33:56I mean, so far everything has been gung-ho and stable, but is this something that you would watch closely?
34:02Yeah, it's very likely a deal already and it's likely a good deal.
34:09So what has been UP for last 5-6 years, 7 years, I would say would be Andhra and perhaps even Bihar.
34:15So that will be for India and for all of us, it will be an additional incremental engine of growth.
34:22So that won't be seen as a negative necessarily and you're saying the deal is already done, the halwa is already made, so that's fine.
34:30But I'm saying so that's not going to be seen as a negative in terms of, you know, that there is a leverage to be used by allies.
34:38So that's not a negative. Because remember, you're talking about UP, but they are running UP. So that's a different story.
34:47No, no, I mean, NDA is running Bihar and Amravati. So in a sense, it's no different.
34:58It's absolutely the best way forward that an ally actually trade off some constitutional positions, speaker positions for the development of the state.
35:08And we all as market participants should be very happy for this trade.
35:12And more importantly, there is a plan in the mind of the Chief Minister to execute a very large project, which he did phenomenally until then he was shipped out of that job.
35:26So, in fact, you know, we did lend to Amravati projects long ago, did visit that, it's a phenomenal project.
35:33And, you know, it will be seen as what Chandigarh was seen 40-50 years ago.
35:38Entirely new city and could become a modern city for many other states that, you know, you could actually end up having new capitals in many states if Amravati succeeds.
35:48So it's a very, very good deal that what's happening.
35:52Could be interesting. OK, my final question to Ravi Dharamshi, the big, the known elephant in the room or the big elephant in the room, actually both actually, which is the FISC glide path.
36:03Right. When S&P upped the outlook, they spoke about how India needs the center per state to come to sub 7 percent.
36:10Now, we know states are about 3 percent. So center needs to be at 4.
36:15Do you think they'll use this opportunity with the extra bonanza that they have to overshoot on the FISC number or will they just meet the numbers?
36:23Talk about four and a half next and then make let the market believe that they are on route for.
36:29The headline numbers clearly will maintain the fiscal glide path.
36:34I don't think the headline numbers will change dramatically.
36:39However, the devil will lie in the detail. And over there also, I believe this government has shown tremendous fiscal discipline.
36:48I don't think they'll veer from that path in a significant manner.
36:52The extra, you know, almost one and a 1.2 lakh crores of dividends from RBI and another 40, 50 bips of extra revenue through the tax collection gives them enough room to, you know, cater to their allies needs, cater to the upcoming state elections need and yet not veer away from the path of fiscal discipline.
37:16Manish, I know you want to come in, but I was actually asking that can they actually beat it by 10, 20 basis points closer to four and a half?
37:25So could that happen? Because we haven't seen that happen. But Manish, you were raising your hand. You want to come in on this?
37:31Very quickly, a market expectation. And again, that's by actually talking to a lot of folks in Delhi is 10 basis points for the consolidation.
37:40So I guess this is what bond markets are cheering for.
37:44Two, and I think Bala did talk of it, you know, this major confusion which lies in the mind of a banker at a conceptual level that, you know, if money goes to equity market or arbitrage fund, it means lower deposit rate.
37:57That's not the way banking or financial plumbing works. Almost all money, sorry, rather almost all money lends up in banks.
38:07And therefore, even though you see in last two years, initially the conversation was that if mutual funds don't, mutual funds getting a lot of money and therefore clamp down there.
38:17So the tax treatment to debt mutual fund, the SOPs are removed. And yet what you see in last two years is very little deposit growth.
38:25So this conceptual misunderstanding leads to a lot of these pathways that if money goes to equity market, therefore at margin bank is losing.
38:34No, if money goes to equity market, it is still there in the bank only.
38:39Ravi, one quick question before we have to start wrapping up the show is high conviction ideas.
38:45So what are the sectors and subsectors that you're betting on, which form a part of your core portfolio currently?
38:52And you don't need to give me stocks. I'm assuming there'll be a restriction there.
38:55But sectors, subsectors at the big bets are where the alpha is going to come from.
38:59So I think before what to bet on, I think what is important to note is there are some sectors which are dependent on central government capex.
39:07And those sectors actually face a risk. We might not be.
39:11There might be no increase in the capex from the central government side on the defense or on the railway side.
39:17So those sectors and they have been the best performing sectors.
39:21No, no doubt about it. There might be some earnings momentum which carries them through.
39:26But I don't see incremental order flow to that sector or incremental allocation to that sector happening.
39:32So those are the sectors which clearly face a challenge.
39:36Overall, I feel that ideally there should be some shift away from capital goods and subsector towards more slightly more towards consumption and export oriented sector.
39:50One, primarily because these sectors have not done well for the last four or five years.
39:54And there is a valuation. If I can say the valuations are relatively better over there.
40:01Second, there are some green shoots beginning to appear over there.
40:05So the risk reward from a three to five years perspective is more on the side of the sector rather than towards the capex oriented themes.
40:13OK, final question from mine to Mr. Seta.
40:17Mr. Seta, to your mind, based on your conversations with corporates around taxation or otherwise, and keeping the budget math in mind,
40:26what is it that you are watching out for? What is it that you think your client list is wanting from the businessman perspective?
40:35I think by and large, clients and the corporate sector is happy with the current tax regime and the stability thereof being maintained with not too much tinkering, not too much changes.
40:48I don't think there is a big expectation of some big stops to the corporate sector from the tax point of view.
40:55But certainly there is an expectation and hope that stability and predictability, which has been the hallmark of this government, will continue.
41:03And, of course, a big, big expectation that the way this government or this regime has managed the macro stability of this country and that is across various parameters will be maintained.
41:17I think two big things that need to be addressed, of course, the food inflation and the rural growth, which are very muted.
41:24Food inflation is high. Rural growth is muted. So something there.
41:28And I don't know, I mean, not much is being spoken about, but while there is enough both tax revenue as well as non-tax revenue that the government has,
41:37both from the direct indirect taxes side as well as maybe non-tax revenue like the RBI dividend.
41:44I'm not too sure whether it's a bad idea right now, if any, for the funds are required and to manage the fisc better.
41:51It might not be a bad idea to really give a big push to PSU disinvestment at this stage.
41:57The valuations are really good. I think the market dynamics will do with some additional supply side on the capital market side.
42:05And it might be a good way to also shore up any government revenues, improve the fisc and probably even give a push to some of the expenditure initiatives that might be required for various reasons that we already discussed.
42:18They don't seem keen, though, to disinvest anything. So is that is that in the bucket of I hope this happens, but I don't think it will.
42:28That's more in the nature of hope. That's more in the nature of hope. But I wouldn't completely rule it out.
42:34I think it might be actually a wise move in retrospect if the government were to look.
42:38OK, so then let me let me ask that to Ebala as well. What is what is in your list of I hope this happens, but it might probably not.
42:46But I have a different argument on that. I think the government has become more richer with the increase in the value of all the public sector companies.
42:54And therefore, the richness of the government, not necessarily they are divest and therefore bridge the fiscal gap.
43:02Along the side, they also create a huge asset. But just one point to that. Everything is not an HAL. They also have an MTNL. It's not that everything is a jewel.
43:11One of the one of the things which in my own belief is the asset that they have created, leave aside market cap, I think the asset that they possess,
43:19whether it is through the NHCI or through the power grid corporation or through other public sector enterprises, the asset that they have created can be monetized by the pension funds.
43:28Asset monetization has been a big program where the government has been pursuing for the last number of years.
43:33They are not done much on this space. And there is a high probability the largest investment in the country from the pension funds could come in the asset monetization.
43:42And therefore, they will be able to raise enough funds. And that's one of the reasons I'm saying that probably the budget will continue to keep focus on the growth oriented budget.
43:51And even the state that you talked about earlier, between the Andhra and Bihar, and the contrary, it will probably add to the growth of the economy from the respective states.
44:00If you look at today, the aspiration of most of the states, Maharashtra talking about 500 billion dollar economy, UP is talking about 1 trillion dollar economy.
44:10Assuming scenario of Bihar and Andhra Pradesh is such a powerful state, can contribute more to the broader economic growth.
44:17It will only add good to the country on the overall basis, even if they spend some money, which can be considered.
44:22I agree. I'm not saying it's a bad thing if they grow. The question is, did they have to allocate?
44:31I think that's the only nuance over there. Every state should grow. No question about it.
44:36But just one thing on the divestment, if a company is not a jewel, there won't be takers anyway. So that is part one.
44:42And part two, I just referred to the interview that Prime Minister Modi gave to Sanjay Pugaliar before the election.
44:48He was very happy with the fact that the PSUs are growing the way they are and therefore, why is there a need to sell?
44:55I think we should get a quick view from Manish and Ravi on this because it's turning into an interesting point.
45:01A quick view from, let me come to Manish first on it. Do you think that divestment is on freeze or do you think that there is still some hope for it?
45:10And will we see that in the budget?
45:14No, governments are bad fund managers. They sell very cheap and they almost never sell expensive.
45:20And which is why in some sense, returns are zero sum. So markets make a lot of money because government sells cheap.
45:27Because markets are very expensive, the reflex of the government is not to sell.
45:32So you don't think they'll sell. Ravi, what about you? What do you think?
45:36I tend to agree. I think they did a lot of QIP way back in 2020 and 21 when the stocks were not doing well.
45:44And now when the stocks are really, really overpriced, they are not thinking about doing.
45:49I think it's a smart thing to do. But unfortunately, I also fall in the camp that doesn't believe it will happen.
45:55You know, what's interesting is in the last six months, you've had 450 companies, promoters have taken money off the table in the private sector.
46:02So this is the clear difference between the government who is a stakeholder, who is enjoying the wealth, at least paper wealth for now.
46:09But thank you. Thanks a ton, gentlemen. We'll hopefully see you on Tuesday and continue these in-depth conversations.
46:15It's going to be fast paced on Tuesday. But looking forward to seeing all of you.
46:19Well, that's that's our budget think tank and you will get a sense from all of them on the budget day as well.
46:25But of course, thanks for tuning in on this very special show.
46:29And it's a goodbye. It's a wrap on from all of us on this one.
46:33But stay tuned to NDTV Profit for more such interesting conversations.
46:59Thank you.
47:29Thank you.
47:59Thank you.
48:29Thank you.
48:59Thank you.
49:29Thank you.
49:59Thank you.
50:15Good morning and welcome to NDTV Profit.
50:17My name is Ruja Somaiya and today we are going to discuss Mastec, which has come out with its first quarter FY25 earnings.
50:23Talking about the earnings, revenue was up around four and a half percent, while margins were largely flat at around 12.8 percent,
50:31while net profit was down about 24 percent during the quarter.
50:34And we are being joined by the CFO, Mr. Arun Agrawal, to talk to us about the results.
50:39Hello and welcome to the show, sir. Thank you for joining us.
50:42What's your take on the results this time? Margin largely flat, but revenue up about four and a half percent.
50:50Thanks, Ruja, for having me here.
50:52We are really happy with our quarterly performance.
50:55As we have stated in the past, our order book continues to grow.
50:59While the macroeconomic environment challenges and the delay in decision making continues,
51:03but the strategic investments which we have made consistently over the last three years has started giving the results.
51:09The same is reflected into our consistent order backlog growth, which is $260 million as we speak, 23 percent growth year on year in IRNA terms.
51:18The same has started reflecting into our revenue growth.
51:20We have grown 4.3 percent in IRNA terms, to be precise, and 4.1 percent in constant currency quarter on quarter,
51:26which is really good growth in line with our expectation.
51:29On the margin side, yes, EBIT is mostly flat.
51:32However, on the operating EBITDA side, we saw some dip, which is, again, as you ramp the growth,
51:37there are certain costs which are associated from the timing when you start the project versus, you know, we have got the resources on board.
51:43There were some challenges from the timing perspective, and also we had some period in the AMIA.
51:47More from the timing perspective, again, as you approve for them.
51:50From the business perspective, as we see, the revenue growth will continue to be there,
51:55and also margin improvement will be there in line with our expectations.
51:58So we are really confident and looking forward to quarter on quarter growth going ahead as well.
52:03So, sir, what kind of margins do you expect the company to achieve going ahead, and what will be the key levers?
52:09As I mentioned, you know, on an operating EBITDA basis, we have reported 15.2 percent this quarter,
52:15and we track more operating EBITDA.
52:18This will continue to improve.
52:20We have stated that our objective is to trade in the range of 17 percent in the short term to medium term.
52:25However, it will take a quarter or two to come back to that level,
52:28but a part of 16 percent is the starting point, and gradually, in the coming quarters, we will move to 17 percent kind of a range.
52:35Okay, right, I got that margin point, but let me move to order backlog.
52:41It has been around 2,100 crore for the current quarter, but when I look at the past quarter also, the quarter four,
52:49it has been around the similar line.
52:51So in terms of order book, was this quarter a little muted?
52:55Quarter one is always seasonally lower quarter.
52:58From the timing perspective, you book very strong order in quarter three, quarter four,
53:02because that sets you up for the next year growth, right?
53:05That was the focus.
53:07Quarter one, where the most of the renewal happens and some of the net new deals also gets closed,
53:11as a pattern which we have seen in Mustang.
53:13So we are really happy because whatever numbers we were planning, we have closed better than that,
53:17which has reflected into the numbers out there.
53:20So from the market perspective, we don't see any challenge in the areas we are operating at.
53:24But yes, delay in decision-making continues.
53:26The longer the cycles are there, discretionary spends are still under a lot of scrutiny.
53:30So those patterns will continue.
53:32But there's a pattern which has emerged in terms of all the geographies where we are operating,
53:37the cloud deals where we are operating as well.
53:39We are getting good momentum building up there, which is reflected into our numbers.
53:44So discretionary spends are still under pressure is what you mentioned.
53:48It's under a lot of scrutiny. Absolutely.
53:51The things are improving, the customers are becoming much more lighter,
53:54but scrutiny has not gone away.
53:56So do you think the second half of the year will be better as US elections turn out
54:01and things be a little clearer? Will that be good for the company?
54:05We are looking ahead to it. The UK elections are over.
54:08We expect a lot of these will also start coming in the UK market
54:12because we have been very strong in that market as well.
54:15And US elections and as Fed starts cutting down the rates down the road,
54:19we believe a lot of momentum will build.
54:21We are also looking forward to that momentum building because all of those are going to help
54:26in terms of our revenue growth further on top of it.
54:29Okay. So with that, let me just move on to the geography kind of bifurcation in terms of revenue.
54:35UK, Europe has been growing at a higher pace than the US.
54:39So what kind of growth over here do you expect?
54:42Around 17 to 19 percent is what the aspirations were.
54:46That's a more medium to long term aspiration.
54:49Obviously, it depends upon the market scenario.
54:52As we are operating more with a muted market,
54:55giving focus and growth is of a high confidence to us.
54:59But yes, market improves.
55:00Then obviously the same will reflect into our ambition of delivering better than market growth in the coming period.
55:08Sure, sure. Thank you so much for joining us.
55:10I think we are out of time right now. A lot of questions,
55:13but we'll definitely catch up with you over the next quarter.
55:16All the best for your earnings ahead and thank you for joining us.
55:25Thank you.
55:55Thank you.
56:25Thank you.
56:55Thank you.
57:25Thank you.
57:55Thank you.
58:25Thank you.
Recommended
Dubai: 5 new bridges over Trade Centre roundabout to bring travel time down to 1 minute
Khaleej Times
Budget 2024: Economics Professor Delivers Bold Insights on Budget 2024 | Exclusive Interview
Oneindia