Deal activity moderated in January with 8 deals of ~USD1.5Bn (vs 14 deals of Union Budget
2021 was one of the best budgets in the recent years, the Govt has gone for Higher Capital
Expenditure and an Expansionary Budget
Some of the Key Highlights are
● Higher capital expenditure: While total expenditure growth is flat in FY22E but capital
expenditure to grow at 26% in FY22BE over FY21RE.
● Expansionary budget with a focus on growth; Emphasizing the importance of Aatmanirbhar
Bharat in order to boost manufacturing in India which in turn would provide the necessary
boost for job creation.
● Infrastructure development: The emphasis on infrastructure development in the budget is
impressive with focus in allocation to roads and railways; Creation of a Development Financial
institution (DFI) which will provide long term capital for the National Infrastructure Pipeline (NIP)
● Proposal to set up an Asset Reconstruction Company: In order to solve the bad loan
problems of the Public sector banks and strengthen the balance sheets, the government further proposes to set up an ARC (Asset Reconstruction Company) for aggregating / pooling bad loans
of state banks.
● Fiscal consolidation slower than expected: Endeavour to bring down fiscal deficit to below
4.5% of GDP by FY26E.
● Need to execute well: The success in the schemes announced will depend a lot on the
ability of the government to execute.
Strategic disinvestment: The government has outlined the policy of
strategic disinvestment of public sector enterprises. The policy provides a clear roadmap for
disinvestment in all non- strategic and strategic sectors. The government has identified four
areas that are strategic where bare minimum CPSEs (central public sector entities) will be
maintained and rest privatized.
● Disinvestment target set at INR1750Bn for FY22BE; Privatization of 2 state owned banks
and LIC (Life Insurance Corporation) disinvestment to be key.
In 3QF21, the markets were expecting a pretty good set of nos from Corporate
India since the Demand in the festive season has been very good for almost all the sectors. The
shift in market share from UNorganised to Organised has continued in this quarter as well given
that the Supply Chain of the Unorganised is still broken and in some cases even if the Supply
chain is fixed, the Distributors have stuck with the Organised guys.
● This has turned out to be the best earnings season in a decade so far with the extent
of beat, broad-based sectoral participation in earnings, consequent upgrades and upgrade/
downgrade ratio. Barring NBFCs, all other sectors have beaten earnings expectations. Some
Big numbers which are yet to come and can impact aggregates.
● Vaccination Drive:
India kick-started its vaccination drive in mid-January and inoculated
over ~2.8mn people out of the ~300mn people belonging to high-risk groups including frontline
workers, elderly and those with co-morbidities.