The GST is bound to have an enormous positive impact on the overall economy.
GST structure leads to efficient decision making, for example a manufacturing company can decide to move its inventory from a slow moving market to a market where the sales are brisk.
All eyes are set on the roll out of Goods and Service Tax (GST) bill during the Parliament’s monsoon session. This could prove to be a landmark bill that India much deserves. The bill, if introduced will ease the economic distortion, creating a uniform tax code across the country. The bill will especially benefit large, organised businesses in the country, wherein the movement of goods across various states becomes a lot easier. The GST structure leads to efficient decision making, for example a manufacturing company can decide to move its inventory from a slow moving market to a market where the sales are brisk, without actually worrying about the taxes at the state level. This further leads to improvement in efficiencies in the working capital structure of companies.
The GST is bound to have an enormous positive impact on the overall economy. While many companies, across various sectors in the country will benefit from the GST roll out, we are particularly bullish on companies which are in the retail side with a pan India play. Needless to say, the companies that will benefit the most would be those which have showcased balance sheet strength in term on lower leverage and positive cash flow from operations.
Here are our top 3 picks considering the GST rollout and its eventual impact on warehouse consolidation:
Kamal Dials and Devices Limited (KDDL Ltd) – KDDL operates and manages the luxury watch boutique called ‘Ethos Watch Boutiques’. With GST coming in place, KDDL stands to benefit significantly as they can freely move their inventory and focus on stores where the sales are higher.
Jyothy Laboratories Limited – While it is hard to pick a single FMCG company that is likely to benefit from GST, our pick would be Jyothy Laboratories Limited. Jyothy has strong brands in household and personal care products. They will be in a position to move goods quicker and closer to distributors who have a deeper market penetration.
Amara Raja Batteries Limited – Considering we expect a strong volume growth in 2 and 3 wheeler segments over the next couple of years, we believe well capitalised auto ancillary companies with deep distributor network to benefit from the implementation of GST. Given this we particularly like Amara Raja batteries Limited, which is a market leader in the 2 and 4 wheeler batteries. They have a strong brand value along with technological capabilities.
(The author is VP, education service at Zerodha)