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Impact on companies in the FMCG sector

Issues Removal of special excise on toiletries Cut customs on raw materials Increase in abatement on MRP from 30% to 40%

Initiatives Dividend tax cut to 10% Surcharge of 15% on cigarettes Excise waived on food preparations

Post-Budget show: Outperformed

The positives include the cut in dividend tax, cut in import duty on soda ash, exemption of food preparations from excise and the doubling of import duty on tea. Negatives include the 15 per cent surcharge on cigarettes and the withdrawal of partial exemption on biscuits and laundry soaps.

Hindustan Lever

HLL should benefit from the cut in import duty of soda ash, a major raw material for detergents. The excise exemption on fruit-based food preparations will boost the Kissan brand. Ice-creams sold through vending machines will be exempt from excise, which times well with HLL's strategy. The introduction of 4% excise on toothbrushes would impact it slightly.

ITC

Most analysts had already factored in a 10 per cent hike in excise on cigarettes in light of the Gujarat earthquake. However, the 15% National Calamity Contingent Duty came as a rude shock, which is evident in the 6.25% fall in ITC's share price. However, the fact that the budget was equally severe on alternatives (bidis etc.) would come as a relief.

Nestle India

With a fair percentage of revenue being generated from their culinary products -comprising mainly ketchup and soups - Nestle stands to gain from the exemption of food preparations from 16 per cent excise levied in the last budget. Analysts estimate the culinary division (including noodles) to constitute at least 15 per cent of revenues.

Britannia

Britannia is the only consumer goods company (apart from the cigarette companies) to have got a raw deal this budget. The finance minister has rolled back the partial exemption of 50 per cent on excise on biscuits of MRP not exceeding Rs.5/- and weight not exceeding 100 grams. This will deal a big blow to some of the company's brands including Tiger.

Cadbury India

Cadbury is the only company in the sector that has remained unaffected by the various measures taken in the budget. There were expectations of gaining exemption from excise or at least a reduction in the excise being charged on sugar confectionery. It will, however, gain from the removal of 10% surcharge on imports as it imports most of its cocoa requirement.

Tata Tea

The doubling of import duty on tea and coffee would have relieved lobbyists calling for a hike in import duty in light of the removal of QRs effective April 2001. However, analysts feel that imports were never a big threat. The tea industry would also benefit from the increased development allowance of 40 per cent.

Source: Business Standard

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