16 April 2020
E
CO
S
COPE
The Economy Observer
India’s reported fiscal deficit could top 12% of GDP in FY21
RBI purchases may amount to 2.5–3% of GDP
After Japan declared an economic stimulus package worth ~20% of its GDP to combat the impact of the COVID-19 crisis,
the US Federal Reserve announced last week that it would pump an additional US$2.3t to support its economy. With
every such piece of news, pressure on the Indian government to jump on the wagon increases sharply. Thus far, the
Reserve Bank of India (RBI) has done the heavy lifting, but the fiscal support extended has amounted to just ~0.9% of
GDP, among the least compared with the support pledged by the world’s other major economies.
Our estimates suggest that even if the government does not announce any additional stimulus package, India’s
reported fiscal deficit target would slip by almost 2 percentage points of GDP this year (to ~5.6% of GDP from the target
of 3.5%) on account of lower taxes, lower denominator (GDP), and the welfare package, partly offset by windfall gains
from lower crude oil prices (and an expected hike in excise duty).
However, as discussed in an earlier
report,
we strongly believe the government could introduce an economic fiscal
stimulus package to support vulnerable working classes, MSMEs, and the worst-affected industries. We estimate a
package amounting to ~2% of GDP, which would have to be funded by the RBI by subscribing to one-off non-renewable
COVID-19 support bonds.
The center’s fiscal deficit could therefore stand at ~7.6% of GDP, the widest since liberalization. Moreover, while states
have budgeted for a fiscal deficit of 2.7% for FY21, the figure is likely to be ~4.4% of GDP. This implies the combined
fiscal deficit could be ~12% of GDP (INR25t) in FY21, the highest in at least the past five decades, since the time that this
data has been available, and higher than the previous peak of 9.6% of GDP in FY02. A sensitivity analysis of fiscal
receipts vis-à-vis GDP growth confirms a combined fiscal deficit of 11–14% of GDP in FY21.
This suggests that if the authorities wish to keep bond yields under check, the RBI’s purchase of government securities
would have to be much higher. Considering that foreign capital inflows remain weak, in our view, the RBI may
eventually resort to buying gilts worth INR5–6t (or 2.5–3% of GDP) this year.
India has declared a welfare
package and announced
compliance-related
relaxations for businesses
worth INR1.85t.
India’s fiscal support package too small against packages of several global nations:
In light of the disruption caused by the COVID-19 lockdown, many of the world’s
major economies have announced large fiscal support for their countries. Early this
week, Japan announced a fiscal stimulus package worth ~20% of its GDP
(refer to
Exhibit 1 on the following page and
Appendix I
at the end of the report).
With every
such piece of news, pressure on the Indian government to jump on the wagon
increases sharply. Thus far, India has declared a welfare package and announced
compliance-related relaxations for businesses worth INR1.85t (or 0.9% of GDP),
among the least compared with the support pledged by the world’s other major
economies.
Monetary easing in line with that of global counterparts:
Nevertheless, the
RBI’s
measures
to support borrowers and lenders during this difficult phase have been in
line with those of its global counterparts
(refer to
Appendix II
for details on the
monetary easing announced by select nations).
The RBI has provided a three-month
moratorium to all borrowers, effectively cut policy rates by 115 bps (reverse repo
rate has been reduced to 4% from 5.15%), extended the marginal standing facility,
and reduced the cash reserve ratio, among many other measures. The only major
difference vis-à-vis the most active central banks is the absence of outright purchase
of government securities or non-gilt papers.
Nikhil Gupta – Research Analyst
(Nikhil.Gupta@MotilalOswal.com); +91 22 6129 1555
Yaswi Agarwal
– Research Analyst
(Yaswi.Agarwal@motilaloswal.com); +91 22 7193 4196
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
Exhibit 1:
Size of fiscal stimulus packages announced by world’s major economies (% of GDP)
20.0 19.1
16.2
12.0 11.0
8.4
5.5
5.3
Fiscal stimulus (% of GDP)
4.9
3.5
3.1
3.0
3.0
2.7
2.0
2.0
1.4
1.3
1.2
1.2
0.9
0.8
0.2
0.0
Appendix I
gives details on country-wise fiscal stimulus
Updated as of April 14, 2020
Source: International Monetary Fund (IMF), MOFSL
One way to ascertain
governments’ ability to
stimulate the economy is to
understand the likely fiscal
slippage in the absence of
any additional fiscal
stimulus.
Center’s fiscal deficit could slip by 2 percentage points of GDP in FY21:
With the
economy stagnating, the question now is not about the slowdown, but the intensity
of recession. There is no doubt that almost all major economies would decline in
CY20; therefore, the fiscal stimulus seems like a no-brainer. Nevertheless, the
difficult question for the Indian economy is to mull over the extent of fiscal stimulus.
With India’s combined fiscal deficit (at ~6% of GDP) already among the highest
compared with major economies, there is limited scope for a large fiscal stimulus.
One way to ascertain the ability of governments to stimulate the economy is to
understand the likely fiscal slippage in the absence of any additional fiscal stimulus.
Four forces in particular would be at play in FY21, which would help determine the
likely extent of fiscal slippage: a) the adverse impact on direct taxes (due to a high
level of unemployment and lower corporate profit (or outright loss), b) the adverse
impact on indirect taxes (due to very weak economic activity), c) additional spending
of INR1.35t on account of the welfare package (remaining INR0.5t is not new
spending), and d) lower denominator (nominal GDP). Against these forces, the only
offsetting factor would be the windfall gains from the collapse in crude oil prices,
which would aid in reducing fuel subsidies and potentially also garnering more
resources through a hike in excise duties on petrol/diesel in 2HFY21.
Our estimates suggest gross
taxes could decline ~2% YoY
to 9.6% of GDP in FY21 from
10% of GDP in FY20.
After working out these forces, we believe gross tax receipts in FY21 could witness a
shortfall of INR2.8t on account of the COVID-19 lockdown. Against the FY21 budget
estimate (BE) of INR24.2t, we had expected gross tax receipts to stand at INR22.6t.
However, gross tax receipts could now be closer to INR19.8t
(Exhibit 2),
weighed by
the disruption caused by the COVID-19 lockdown. This implies gross taxes could
decline ~2% YoY to 9.6% of GDP in FY21 from 10% of GDP in FY20. Segment-wise tax
receipts suggest that while corporate profit tax could decline 7.6%, personal income
tax could grow 2.4% (in line with nominal GDP growth of ~2%) and indirect taxes
could fall ~5%. However, note that we believe the government could try to collect
an additional INR400b through higher excise duties on petrol/diesel during the year,
implying that indirect taxes could decline only ~1% YoY in FY21.
Net tax receipts, however, could decline 8.3% YoY as the effective devolution ratio
this year is likely to be higher (35% in FY21, vis-à-vis 30.5% in FY20). Furthermore,
with lower corporate profit and very weak economic activity, CPSEs’ non-tax
contribution to the exchequer would also be lower than otherwise
(Exhibit 3).
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Finally, with financial markets remaining in turmoil, it seems unlikely that the
government would be able to raise INR2.1t from divestment this year. We assume
such receipts to be closer to INR1.0t in FY21
(Exhibit 4).
Total fiscal receipts could
stand at INR16.7t in FY21,
against INR19.2t expected
earlier (and the government
target of INR22.5t).
Overall, the government’s total receipts could amount to INR16.7t (or 8.1% of GDP)
in FY21, against INR19.2t (8.6% of GDP) expected earlier [and the government’s
target of INR22.5t (10% of GDP)]. This implies 5.7% YoY decline in the total receipts
in FY21, against 6% growth in FY20.
Exhibit 2:
Fiscal deficit could slip by ~2 percentage points of GDP in FY21 without any additional stimulus
INR trillion
Total receipts
Net tax receipts
Gross tax receipts
Corporate tax
Personal income
GST
Customs duties
Excise duty
Other tax
Non-tax revenue
Non-debt capital
Disinvestment
Total spending
FY19
P
16.7
13.2
20.8
6.6
4.6
5.8
1.2
2.3
0.2
2.5
1.0
0.8
23.1
RE
19.3
15.0
21.6
6.1
5.6
6.1
1.3
2.5
0.1
3.5
0.8
0.7
27.0
FY20
FY20-TD
Old est
14.3
18.0
11.1
16.8
4.2
3.9
5.5
1.1
2.0
0.2
2.6
0.5
0.3
24.7
14.3
20.5
5.8
5.0
6.1
1.1
2.3
0.2
3.1
0.7
0.5
25.7
New est
17.7
14.0
20.2
5.7
4.9
6.0
1.1
2.3
0.2
3.0
0.7
0.5
26.3
RE
22.5
16.4
24.2
6.8
6.4
6.9
1.4
2.7
0.1
3.9
2.3
2.1
30.4
8.0
3.5
224.9
FY21
Old est
19.2
14.7
22.6
6.6
5.6
6.7
1.1
2.4
0.2
3.0
1.5
1.4
27.1
8.0
3.5
224.4
New est
16.7
12.9
19.8
5.2
5.1
5.5
1.1
2.7
0.2
2.7
1.2
1.0
28.2
11.5
5.6
205.0
Source: RBI, MOFSL
Difficult financial
markets
Lower fuel subsidies,
INR1t on fiscal support
Dividends affected by
lower corporate profits
1Q/1HFY21 losses to
offset profits in 2HFY21
Lost income / Higher
unemployment
In line with lower GDP
growth
In line with sharp
decline in imports
Including INR400b due
to higher excise duties
Factors
Effective devolution of
35% vs 31% in FY20
Fiscal deficit
6.5
7.7
10.4
7.7
8.6
Deficit (% of GDP)
3.4
3.8
3.8
4.2
Nominal GDP
189.7
204.4
204.0
201.0
Tax buoyancy may or may not be affected based on special factors mentioned
Exhibit 3:
CPSEs dividends expected to grow ~36% YoY to
INR658b in FY21BE
(INR b)
CPSE dividends
94.1
14.4 18.4
22.3
69.4
-3.4
% YoY
Exhibit 4:
Center expects divestments in total receipts to
grow sharply in FY21(BE)
Disinvestment proceeds
(INR b)
MOSL estimates
2,100
-53.1
-10.3
-7.4
12.1
36.2
1,000
377 421 477
228 181 259 294
850
650
1,000
500
241 285 134 259 317 306 519 465 431 483 658
Source: Department of Public enterprises, Union Budget, MOFSL
Prior to the COVID-19 outbreak, when we anticipated lower receipts, we also
expected the central government to adjust its spending to meet the targeted fiscal
deficit. Although the total receipts would now be much lower, it would not be
possible for the government to reduce its spending proportionately. There are likely
16 April 2020
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 Motilal Oswal Financial Services
to be measures working in the opposite direction for spending as well. Two factors
would lead to lower spending: a) lower fuel subsidies and b) lower capital spending.
On the contrary, total spending would be higher on account of: a) the welfare
package announced by the central government in late Mar’20 and b) larger
compensation extended to the state due to the receipt shortfall
(Exhibit 5–6).
Fiscal spending could come
in at INR28.2t in FY21, vis-à-
vis the government target
of INR30.4t.
All-in-all, our estimates suggest government spending could stand at INR28.2t (7.2%
YoY higher) in FY21, higher than INR27.1t expected earlier (and much lower than its
target of INR30.4t).
Exhibit 6:
Large part of fiscal spending non-discretionary in
nature (% of total spending)
S&W
54.2
13.8
5.5
20.8
Interest
53.9
Pensions
Subsidies
SIPS
Exhibit 5:
Government announces INR1.35t worth of new
spending in FY21
Cost to exchequer New
(INR b)
Spending
Public distribution System
450
Y
Cash transfer in Jan Dhan Account
340
Y
MGNREGA
56
Y
PM Ujjwala Yojana
130
Y
Employee provident fund
50
Y
Higher health care spending
150
Y
PM Kisan Yojana
174
N
Welfare fund for construction workers
310
N
Insurance cover to health workers
Y
Self-help group
190
N
District mineral fund
N
Total cost
1,850
Scheme
57.5 57.1 58.1 57.5 56.8 56.4 56.4
10.5
18.2 16.3 15.5 14.7 11.9 11.1
6.3
5.6
5.4
6.7 6.2
4.9
4.8
50.4
14.5
16.7
4.8
4.7
24.2 24.7 24.3 24.7 25.2
20.9
22.2
24.0
19.5
14.1 11.6 11.6 12.1 12.0 12.7 12.7 13.9 14.3 14.3
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
SIPS = Salary, Interest payments, Pension and subsidies
Source: Union Budget, MOFSL
Even if the government
does not announce any
further stimulus package,
India’s reported fiscal
deficit target would slip by
~2 percentage points to
5.6% of GDP this year.
If that is the case, the central government’s fiscal deficit, without any additional
economic stimulus, could be ~5.6% of GDP, against the target of 3.5% of GDP.
Therefore, even if the government does not announce any additional stimulus
package, India’s reported fiscal deficit target would slip by almost 2 percentage
points of GDP this year on account of lower taxes, lower denominator (GDP), and
the welfare package, which would be partly offset by windfall gains from lower
crude oil prices (including the expected hike in excise duty).
Center’s fiscal deficit could be at three-decade high of ~7.5% of GDP this year with
economic stimulus:
With fiscal slippage of about 2 percentage points of GDP,
without any additional fiscal stimulus, the scope for a second economic package
reduces considerably. However, we still believe that the government could
introduce an economic fiscal stimulus package to support poor citizens, casual
laborers, and MSMEs.
Additional stimulus could
be worth ~2% of GDP,
taking the center’s deficit to
~7.6% of GDP in FY21, the
highest in 30 years.
As we have discussed in detail in our recently released
report,
the economic
stimulus could be worth ~2% of GDP, taking the center’s deficit to ~7.6% of GDP in
FY21, the highest in almost three decades since the early-1990s
(Exhibit 8).
The
details of our three-pronged 10-step approach with tentative cost to the exchequer
are listed in
Exhibit 7
on the following page. Furthermore, the RBI would most likely
fund this additional package by subscribing to one-off non-renewable COVID-19
support bonds on account of exceptional circumstances.
16 April 2020
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 Motilal Oswal Financial Services
Exhibit 7:
Our 3-pronged 10-step urgent toolkit might cost the exchequer ~INR4t (~2.0% of GDP) in FY21
Prongs
Steps
Cash transfer to casual/migrant worker
Ex-gratia cash transfer to health workers/police officials
Smooth supply of free essential eatables, gas cylinders,
water
Health/life insurance cover for all vulnerable sections of
society
Free 3 month rent/electricity charges to affected firms
12-month interest free uncollateralized loans to MSMEs
Bail-out package to aviation/hotels/tourism/trade
Open Market Purchases of central/state government
securities to finance all these packages including the
welfare package
Complete scrapping off of reverse repo window
6-months interest free un-collateralized conditional loans
to non-MSMEs
Extension of 3-month moratorium to NBFCs as well
Cost to exchequer
INR T
% of GDP
1.1-1.4
0.3
0.5
0.3
2.2-2.4
0.3
0.1
0.7
~1.0
5.0-6.0
-
0.5
~0.5
~4.0
~0.3
~2.0
Source: MOFSL
1
For the most vulnerable
working sections
Sub-total
2
Sub-total
For MSMEs and other hard
affected sectors
1.1-1.2
~0.5
3
To ensure financial stability
Sub-total
Grand total
Please refer to our
previous report
for details
Combined fiscal deficit could stand at around five-decade high of ~12% of GDP in
FY21:
With the massive shortfall in gross tax collection, states would also receive a
smaller share. Based on our estimates above, the devolution to states could fall by
as much as INR1.0t (or 0.5% of GDP). Incorporating the shortfall in state’s own tax
receipts (SOTRs) and support packages announced by various state governments
(assuming total cost of 0.5% of GDP), states’ fiscal deficit would also be higher than
estimated. While states have budgeted for a fiscal deficit of 2.7% for FY21, it is
more likely to stand at ~4.4% of GDP, the highest in 21 years (it was 48-year high of
4.45% of GDP in FY00).
Combined fiscal deficit
could be ~12% of GDP in
FY21, the highest in at least
the past five decades.
This implies the combined fiscal deficit could be ~12% of GDP in FY21, the highest
in at least the past five decades, since the time that this data has been available,
and higher than the previous peak of 9.6% of GDP in FY02
(Exhibit 9).
Exhibit 9:
Combined fiscal deficit could top 12% of GDP,
highest in five decades (% of GDP)
Combined fiscal deficit (% of GDP)
W/o new stimulus
Exhibit 8:
Center’s FY21 fiscal deficit could be highest in
30 years (% of GDP)
Center's fiscal deficit (% of GDP)
With new stimulus
Budgeted
7.6
5.6
3.5
FY97
FY00
FY03
FY06
FY09
FY12
FY15
FY18 FY21F
Source: RBI, MOFSL
16 April 2020
5
 Motilal Oswal Financial Services
Sensitivity analysis confirms combined fiscal deficit of 11–14% of GDP in FY21:
As
we have discussed earlier in our
report,
it is very difficult to ascertain the exact
impact of lockdown on economic activity due to COVID-19 at this stage. Therefore,
we have also conducted a sensitivity analysis to understand the likely connection
between GDP growth and fiscal deficit
(refer to Exhibit 10 below).
The actual fiscal deficit of
the center was likely to be
~4.3% of GDP, against the
revised estimate of 3.8% of
GDP last year.
Due to economic lockdown in the second half of March 2020, the government
borrowed an additional INR1.3t in Mar’20. This suggests the actual fiscal deficit was
likely to be ~4.3% of GDP, against the revised estimate of 3.8% of GDP last year. The
sensitivity analysis implies if nominal GDP growth is nil (0%) in FY21, the central
government’s fiscal deficit could be 7.8% of GDP and combined fiscal deficit could
be 12.5% of GDP. These estimates assume the new fiscal stimulus (apart from the
recently announced welfare package) from the center amounting to ~2% of GDP.
The higher/lower the new economic fiscal stimulus package is, the higher/lower the
fiscal deficit would be.
Exhibit 10:
Sensitivity analysis suggests combined fiscal deficit would stand at 11–14% of GDP in FY21
INR trillion, unless mentioned
FY21E
FY19P
FY20E
otherwise
Old est.
Total receipts
16.7
17.7
19.2
Gross taxes
20.8
20.2
22.6
Net taxes
13.2
14.0
14.7
Government spending
23.1
26.3
27.1
Center's fiscal deficit
6.5
8.6
7.9
Center's deficit (% of GDP)
3.4
4.3
3.5
States' fiscal deficit
4.8
6.2
6.1
States' deficit (% of GDP)
2.5
3.1
2.7
Combined fiscal deficit
11.2
14.8
14.0
Combined fiscal deficit (% of GDP)
5.9
7.4
6.3
Nominal GDP
189.7
201.0
224.4
Including new economic stimulus worth ~2% of GDP announced by the center
-5%
15.8
18.4
12.0
28.2
16.2
8.5
10.0
5.2
26.2
13.7
191.0
FY21F (Nominal GDP growth)
-2%
0%
2%
5%
16.2
16.5
16.7
17.1
19.0
19.4
19.8
20.4
12.4
12.6
12.9
13.3
28.2
28.2
28.2
28.2
15.9
15.7
15.6
15.3
8.1
7.8
7.6
7.3
9.6
9.4
9.1
8.7
4.9
4.7
4.4
4.1
25.6
25.1
24.7
24.1
13.0
12.5
12.1
11.4
197.0
201.0
205.0
211.0
Source: RBI, MOFSL
Gilt purchases by RBI could be worth 2.5–3% of GDP:
In absolute terms, this means
the central government’s fiscal deficit could be INR15.6t (or 7.6% of GDP), against
the target of INR7.9t (or 3.5% of GDP). Furthermore, states’ deficit could increase
from the budgeted estimate of INR6.1t (or 2.7% of GDP) to INR9.1t (or 4.4% of GDP),
implying a combined fiscal deficit of about INR24.7t, against the target of INR14t. In
light of these developments, the bond market fears a massive supply of government
securities. The benchmark 10-yr bond yield is back to ~6.5%, similar to where it was
in early-Feb’20 and higher than its trough of ~6.05% in early Mar’20.
We believe the RBI would
resort to buying gilts worth
INR5–6t (or 2.5–3% of GDP)
this year.
If the authorities want to keep bond yields under check, the RBI’s purchase of
government securities would have to be much higher. Considering foreign capital
inflows remain weak in FY21, we believe the RBI would resort to buying gilts worth
INR5–6t (or 2.5–3% of GDP) this year. If not, then notwithstanding the COVID-19
lockdown and very weak economic activity, the bond yield could move higher.
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 Motilal Oswal Financial Services
Appendix 1: Summary of various features of fiscal stimulus announced by select world economies
Countries
Australia
Brazil
Canada
China
Hong Kong
France
Germany
India
Indonesia
Italy
Japan
Malaysia
Pakistan
Philippines
Russia
Saudi Arabia
Singapore
South Africa
South Korea
Taiwan
Thailand
UAE
UK
USA
1
2
3
4
5
6
7
8
Fiscal stimulus
(% of GDP)
16.2
3.5
8.4
1.2
5.3
1.6
4.9 (8.4)
0.9 (1.1)
0.2
1.4
20.0
19.1
3.1
1.3
1.2
2.7
12.0
0.0
0.8
5.5
3.0
2.0
3.0
11.0
5
5
Cash transfers to
households
Y
Y
Y
N
Y
N
N
Y
N
N
Y
Y
Y
Y
N
N
Y
Y
@
Y
N
N
Y
7
1
Other benefits to
households
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
6
2
In-kind support to Monetary benefits Compliance relief to
households
N
N
N
N
N
N
N
Y
N
N
Y
N
Y
N
N
N
N
N
Y
N
N
N
N
Y
3
to businesses
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
4
businesses
N
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
N
Y
5
N
Y
N
Y
Y
Y
Y
Y
Y
N
Y
Source: MOFSL, Company
Unconditional one-off cash transfers to either selected class of society or to all citizens
In terms of pension, unemployment allowances, lower prices of essential items, wage subsidies, etc.
Subsidized/Free food supplies, gas cylinders, etc.
Tax relief, social security relaxations, wage subsidies to SMEs or general corporate sector
Non-monetary benefits (extension of tax-filing period or other compliance-related matters)
Including state/provincial fiscal stimulus
Some cash transfer and other benefits to quarantined/sick people; only those directly affected by COVID-19
Stimulus worth KRW9t, including cash transfers to individuals, is announced but yet to be approved
th
Updated up to 15 April 2020
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 Motilal Oswal Financial Services
Appendix 2: Summary of various features of monetary easing announced by select world economies
Countries
Australia
Brazil
Canada
China
Eurozone
Hong Kong
India
Indonesia
Italy
Japan
Malaysia
Pakistan
Philippines
Russia
Saudi Arabia
Singapore
South Africa
South Korea
Taiwan
Thailand
UAE
UK
USA
1
2
3
4
Cut in policy
interest rate
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Additional Purchases of gilt Purchases of non-
liquidity
Y
Y
Y
Y
Y
Y
Y
Y
n/a
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
N
N
Y
N
N
N
Y
Y
N
Y
N
Y
Y
Y
N
N
N
N
N
N
N
Y
N
Y
N
Y
Y
1
Moratorium to
borrowers
Y
Y
N
Y
N
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
N
Y
2
Compliance
relaxation
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
y
Y
Y
Y
N
Y
Y
Y
N
Y
3
Directed lending
to SMEs
Y
N
N
Y
Y
Y
Y
N
Y
Y
N
Y
N
Y
Y
Y
N
Y
Y
N
Y
Y
4
securities
Y
Y
Y
N
Y
N
N
N
gilt papers
Y
N
Y
Y
Y
N
N
N
Y
Source: MOFSL, Company
Provision of liquidity through repo operations, cut in reserve requirements, etc.
One to three months moratorium on loan repayment for individuals or businesses
Easing rules under investments like share buybacks, regulatory compliance to banks to support loan deferment, etc.
Special credit lines for lending directly to small and medium enterprises
th
Updated up to 15 April 2020
16 April 2020
8
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In
case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on
www.motilaloswal.com.
MOFSL
(erstwhile Motilal Oswal Securities Limited - MOFSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products. Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
MOFSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst may have
actual/beneficial ownership of 1% or more securities in the subject company in the past 12 months.
MOFSL and its associate company(ies), their directors and Research Analyst and their
relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in
any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as
an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.;
however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of
the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have served
as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months.
In the past 12 months , MOFSL or any of its associates may have:
1.
managed or co-managed public offering of securities from subject company of this research report,
2.
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
3.
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
4.
Subject Company may have been a client of MOFSL or its associates in the past 12 months.
MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency,
MOFSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and / or its
affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL may
have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial
holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income
from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only.
While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.).
MOFSL also earns DP income from clients which are not considered in above disclosures.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Disclosure of Interest Statement
Companies where there is interest
Analyst ownership of the stock
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong
Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is
only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction
where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in
Hong Kong.
16 April 2020
9
 Motilal Oswal Financial Services
For U.S:
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore:
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110)
provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this
report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors
as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such
Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes
investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions
expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific
recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems
necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its
own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those
involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty,
express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this
document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior
notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their
directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They
may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not
subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to
any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any
registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in
whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022
7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company
Law Tribunal, Mumbai Bench.
16 April 2020
10