Corporate tax cut reconfirmed approach of large investments in the country, says Schaeffler India MD

The government's decision to cut the corporate tax rate was a bold and courageous move, said Dharmesh Arora, MD of Schaeffler India, adding that they "continue to increase our investments in the country".

In the last couple of years, Schaeffler has doubled investments in India, going up to in excess of Rs 350 crore each year, said Arora.

Arora, along with Inderjeet Bhatia, head of Research–India, Macquarie, discussed his views and outlook on the impact of the tax cuts on businesses.

“It is a very courageous and a bold move on the part of the government. Our business is split between both automotive and industrial and fortunately for most of the year, the industrial business has been going very well. So when it comes to sectors like railways, wind, raw material, infrastructure-related, those sectors have done very well. We also have been on the path to continue to increase our investments in the country participating in these sectors," said Arora, in an interview with CNBC-TV18.

“Last few months, we were thinking whether that is something which needs to be slowed down but clearly the announcement that the government has made has reconfirmed the approach," he said, adding "on the capex part, we will stay on the course of continuing to make large investments in the country."

Bhatia, however, said that although the tax cut will help make India more competitive compared to other emerging markets (EMs) but the move alone cannot drive capex cycle.

"We think it can only be one of the more enabling factors. We need to see more announcements on land, labour, foreign direct investments (FDI) from the government and we think that would happen. We would expect the government to keep the pot simmering and that would elevate the expectations of a capex revival. I would not expect a turnaround in a matter of one-two quarters here,” said Bhatia.

“We like names like Maruti Suzuki and Minda Corporation in auto space. The target price for L&T is Rs 1,800. L&T is also one of the key beneficiaries of tax cuts given that their core E&C business in India is at a marginal tax rate of 33 percent. So they should also benefit to the tune of around 7-8 percent on the Indian business,” Bhatia mentioned.