The Union Budget for 2020-21 has levied a national calamity contingent duty (NCCD) on cigarettes and tobacco products which is negative for companies like ITC and Godfrey Phillips, according to Reliance Securities.
As per the Budget documents, NCCD is being increased ranging from Rs 200 to Rs 735 per thousand, depending upon length of cigarette and on filter/non-filter basis.
On smoking mixtures for pipes and cigarettes, NCCD is being increased from 45 per cent to 60 per cent. On other forms of smoking tobacco (other than smoking mixtures for pipes and cigarettes) and forms of chewing tobacco, NCCD is being increased from 10 per cent to 25 per cent.
In a post Budget note, Reliance Securities said that the provision is a negative for tobacco companies like ITC and Godfrey Phillips.
On the other hand, listed domestic footwear companies like Bata and Relaxo are expected to gain from the hike in customs duty on footwear. Custom duty import hike on footwear to 35 per cent (from 25 per cent) and parts of footwear to 20 per cent (from 15 per cent) is likely to encourage domestic manufacturing, the note said.
Customs duty has been increased on a range of goods from electronics, footwear, electric vehicles, furniture and others in the Union Budget.
The hike in import duty on refrigerator/ACs compressors from 10 per cent to 12.5 per cent will adversely affect companies like Voltas, Blue Star, Havells due to a higher import cost.
However, fast moving consumer goods (FMCG) majors are expected to benefit, says Reliance Securities due to a rural push in the Budget.
The government focus on doubling farmer income is likely to benefit rural expenditure and rural growth is likely to pick up, a key beneficiary for FMCG companies HUL, ITC, Dabur, Marico, and Asian Paints.
The reduction in personal income tax is likely to hike the discretionary spending, key for retail companies like Trent, ABFRL, Jubilant Foodworks, and Titan.
Custom duties on various categories of electric vehicles will increase by 5-15 per cent from April 1, 2020 which would encourage domestic EV makers, EV component makers and would specially help the CV makers like Ashok Leyland, M&M, Tata Motors and other OEMs.