Goods & Services Tax Bill, passed in August 2016, is touted to be the biggest tax reform in India since independence. Implementation of GST along with demonetization & other economic & administrative reforms form strong tailwinds for the resurgence of growth in the Indian economy over the next few years. While analysts across the country are still debating the actual impact of GST, Demonetisation etc, beneficiary companies across many sectors have registered strong gains in their financials as well as stock prices already.

GST is expected to result in lower input costs on account of elimination of cascading effect of taxes, lower logistics costs and faster turnarounds in multiple processes for many sectors & incumbents of those sectors. Some of the key outcomes expected are –

·         Simple and unified tax structure to boost investments

·         Improvement in tax compliance & building focus on business and not tax planning

·         Removal of all trade barriers

However, along with the other recent measures, GST will result in a trend that will structurally alter business models for the organised sector  across the country. For a nation that has, arguably, over 50% of its GDP and ~90% employment coming from unorganised businesses across sectors, GST will mark a shift of tide in favour of Organised businesses forever. This transition of the country towards a more formalised economy will be aided by Govt focus on improving the ease of doing business, improving infrastructure, moving towards cashless economy & current demographics of the country.

We believe, while this will result in change of fortunes for many companies, it will also prove to be a great investment opportunity for investors in certain sectors that will be major beneficiaries of this transition. Obviously, these will be sectors which have a large share of unorganized businesses. Auto & Auto Ancilliaries, Building Materials, Consumer Staples, Consumer Durables, Consumer Discretionaries are some of the key sectors, where smarter companies benefitting from this transition that may see a rerating at the bourses due to below advantages.

NFO Opens on 23^rd February, 2017 & closes on 9th March, 2017