Budget and Chemical sector

2 Feb 2023 , 12:02 PM

• Emphasis on battery energy storage systems with a capacity of 4,000 MWH will be supported with viability gap funding. Also, BCD exemption have been extended on imports of silica inputs by two years, and that on lithium-ion cells, EVA sheet/solartempered glass used in solar cells or modules have been extended by one year. Focus on battery energy storage systems, Lithium-ion and solar cells is positive for the chemical companies that have an exposure to supply chain of these segments. Companies such as Gujarat Fluorochemicals, Neogen Chemical Industries and Tatva Chintan Pharma have plans to foray into products/chemicals used across battery value-chain.
• Basic Customer Duty (BCD) on import of denatured ethyl alcohol used for industrial chemicals has been reduced from 5% to NIL. Positive for Laxmi Organics and Jubilant Ingrevia.
• BCD on acid grade fluorspar (more than 97% calcium fluoride) has been reduced from 5% to 2.5%. The benefit arising from reduction in BCD is less than 1% of FY23E Ebitda for companies like SRF, Navin Fluorine and Gujarat Fluorochem.
• BCD on import of Crude glycerin used in manufacture of Epichlorohydrin (ECH) has been reduced from 5% to 2.5. This is positive for Meghmani Finechem and DCM Shriram (capacity coming up soon).
• BCD on import of styrene and vinyl chloride monomer (VCM) has been raised from 2% to 2.5%. This is marginally negative for Styrenix Performance Materials, Bhansali Engineering Polymers, Supreme Petrochem and Chemplast Sanmar. For Gujarat Fluorochemicals, the benefits from BCD on fluorspar are likely to get negated by increase in BCD on VCM.

Analysts of IIFL Capital Services believes positive impact of the budget announcements on the chemical sector.