Healthcare & Medical Devices Industry-

Quote by Ankit Poddar, Director, Candle Partners:- “The bigger headline number that would be watched closely is the spending in healthcare – currently, India is spending around 1.8% of GDP and because of the vaccine spending and potential further outlay, this number is expected to go up substantially this year. The other major policy-level decision is to increase the health insurance penetration which is very low by global standards. Some tweaks in the standard tax deduction limit under Section 80D of the Income Tax Act can help in increasing the penetration. Healthcare (mainly hospitals) is one of the biggest beneficiaries of this change. The majority of the equity capital funding in the hospital sector over the last 3 years (i.e. mainly private equity funding / IPO capital) has been used for secondary stake sale and limited primary capital has been put to use for CAPEX and capacity additions. This sector has a long break-even cycle & there has been substantial demand from the hospital industry leaders to incentivise private sector investment. We may see in this budget some specific tax sops for hospitals”

Pharmaceuticals-

Quote by Ankit Poddar, Director, Candle Partners:- “Domestic pharmaceutical production will continue to be a key area of focus for the government as the sector has delivered extremely well during Covid times with the industry delivering on several critical drugs at great speed during the last 2 years. There is a case for the government to revisit specific segments of drugs and rationalise GST rates to encourage consumption. Example: healthcare supplements still attract 18% GST. The industry needs to be encouraged further by extending the PLI schemes for several critical APIs as there is a dire need for several API players to backwards integrate. Similar incentives are required for specific excipients which are not being manufactured in India and are crucial to the supply chain. As CAPEX for APIs increases over the next few years so would intermediate backward integration production & thus pollution control CAPEX investment would be critical. To ensure and incentivise the industry to invest in green chemistry there is a desperate need to subsidise this CAPEX and give a sizable interest subsidy. Another area closely watched by the industry is the steps that the government takes in the budget for export incentives for both APIs and Formulations. One of the biggest drivers of growth in the industry has been India’s pharma exports which currently stands at USD 24.4 billion

The sector’s R&D expenses as % of sales have consistently been declining in the last 3-4 years after peaking at around 9% +of sales in FY 2017 as per an internal Candle Partners study. One of the justified demands of the sector has been to bring back the 200% R&D tax deduction (from the current 100%) “

FMCG & Retail Sector –

Quote by Sameer Shah, Director, Candle Partners:- “The last 4-6 quarters have seen sizable price increases for most consumer products – discretionary and non-discretionary. Most price increases have been in the region of 12-15%; however, supply-side inflation has been much more and hence margins have been hit by most companies at the EBITDA level. In order to drive demand, most consumer companies would have limited options of price increases in the next 3-4 quarters. The majority of the industry demand in this budget is to rationalise taxes in the short term to ensure that demand can be addressed correctly. Also, consistent commentary from most FMCG companies and their leaders seem to suggest that maximum stress lies in tier 2 and tier 3 towns & rural economies where demand is still muted. The expectation is hence to fix tax slabs for the lower-income so that the individual has more cash in his hands – expectations hence is that the standard deduction limit will get increased “

Chemicals / Speciality Chemical –

Quote by Ankit Poddar, Director, Candle Partners:-“Contrary to some of the stock market movement of several chemical scrips, due to the sharp movement in several chemical prices (which are raw material to the speciality chemical sectors), the last two quarters have been bad for several speciality chemical companies. The recent surge in logistics prices and import restrictions have not helped the cause. The sector expects certain SOPs in the budget which could also come in the form of enlargement of the PLI schemes. While the PLI scheme mostly tends to benefit the larger players, the ripple effect also aids their SME chemical suppliers thus benefiting the overall ecosystem. We have seen several small / mid-sized speciality chemical companies undergoing CAPEX programmes from 2018-2019 onwards (even pre Covid) as the demand was very robust as buyers across the world are evaluating India as an alternate speciality chemical player. However, several of these CAPEX has gone over budget due to time delays as well as the increase in commodity prices of metals/cement, etc. Any CAPEX-based incentive is crucial for this sector as currently, all chemical industry entrepreneurs are keen to invest however recent headwinds have made them sceptical “