Companies & Sectors
Chennai floods hit auto sales in December
Auto sales will be muted across segments during December, due to the Chennai floods. Sales of passenger vehicles will face the maximum impact, says Nomura
 
The floods in Chennai earlier in December would affect auto sales during the last month of 2015, says Nomura in a note.
 
"We expect subdued growth across segments as production was impacted by the Chennai floods. We expect maximum impact in passenger vehicles (PVs) followed by two wheelers (2Ws) and medium and heavy commercial vehicles (MHCVs). However, tractors are likely to continue strong double digit growth benefitting from a favourable base," it said in a research report.
 
In passenger vehicles, Nomura expects industry volumes to remain flat in December compared with same month last year. It sees, major players like Maruti Suzuki India Ltd (MSIL), Hyundai Motor India Ltd and Mahindra & Mahindra (MM) reporting low single digit growth during December 2015.
 
It said, "We expect MSIL to report about 6% growth in domestic volumes (on adverse base, 13% in December 2014), led by new launches like Baleno and S-Cross. We expect inventory levels to moderate as plants will be shut for maintenance from 28 December 2015 to 3 January 2016. Among unlisted original equipment manufacturers (OEMs), Hyundai, Renault-Nissan and Ford are likely to see only modest growth due to the impact of the Chennai floods. Others like Honda, General Motors and Toyota will likely see volume declines, in our view."
 
Talking about medium and heavy commercial vehicles (MHCVs), Nomura says it expect this segment to grow at 12% in December due to an adverse base. "In terms of OEMs, we expect Ashok Leyland (AL)’s volumes to increase by about 5%, impacted by the adverse base. While the company lost four-five days’ production because of the Chennai floods, we expect limited impact on wholesales due to higher inventory. We expect Tata Motors (TTMT)’ domestic volumes to rise by around 11% y-y and VE Commercial Vehicles Ltd (VECV)’s MHCV volumes to grow by about 20%," it added.
 
Nomura sees the two-wheeler segment to witness a growth of about 3% during December, mainly on weak demand from rural India. It said, "We estimate bike volumes to remain flat, while scooter volumes are likely to grow by about 8%. In terms of OEMs, we expect production loss of about 11,400 to 25,000 units for Royal Enfield (RE) and TVS Motor Company (TVS). Thus, overall volumes are likely to grow 17% and 4.5% for RE and TVS, respectively. Bajaj Auto is likely to report a modest 3.5% growth while we expect Hero MotoCorp Ltd (HMCL)’s overall volumes to decline by 1.5%. Honda Motorcycle and Scooter India, Pvt Ltd (HMSI) is likely to report a 9% decline".
 
Auto Sales in December 2015

User

How factoring benefits companies to get prompt payments
Factoring allows companies to receive immediate cash on their sales without having to wait for payments to come in from customers in due course
 
In view of the advantages of assignment of receivables over lending against receivable as defined in the Factoring Regulation Act, 2011 (the Act), companies may strategically decide to undertake transactions that are in the style of assignment of receivables rather than lending against receivables. While the business of factoring covers both assignment of receivables and lending against receivables the provisions of chapter 3, 4 and 5 of the Act are not applicable to lending against receivables.
 
Factoring works mainly on the principle of seller selling the receivables of a debtor to a specialized financial intermediary called a factor. The sale of the receivables takes place at a discount and the ownership of the receivables is transferred to the factor who shall on purchase of receivables, collect the dues from the debtor instead of the seller, enabling the seller to receive upfront funds from the factor. This allows companies to receive immediate cash on their sales without having to wait for payments to come in from customers in due course. With the purchase of the receivables, the factor enters the shoes of the seller and dawns the liability under the contract.
 
The business of factoring in India is regulated by the Factoring Regulation Act, 2011. The Act defines the terms ‘factoring business’ and ‘factor’.
 
Section 2(i) of the Factoring Regulation Act, 2011defines factor to mean:
 
“a non-banking financial company as defined in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934) which has been granted a certificate of registration under sub-section (1) of section 3 or any body corporate established under an Act of Parliament or any State Legislature or any Bank or any company registered under the Companies Act, 1956 (1 of 1956) engaged in the factoring business;"(Emphasis Supplied);
 
Further, Section 2(j) of the Act defines factoring business which states that:
 
"factoring business means the business of acquisition of receivables of assignor by accepting assignment of such receivables or financing, whether by way of making loans or advances or otherwise against the security interest over any receivables but does not include— (i) credit facilities provided by a bank in its ordinary course of business against security of receivables; (ii) any activity as commission agent or otherwise for sale of agricultural produce or goods of any kind whatsoever or any activity relating to the production, storage, supply, distribution, acquisition or control of such produce or goods or provision of any services" (Emphasis Supplied)
 
Further Explanation under the Section 3(2) of the Act defines the principal business criteria for an NBFC-Factor. It states that:
 
For the removal of doubts it is hereby clarified that a non-banking financial company engaged in factoring business shall be treated as engaged in factoring business as its "principal business" if it fulfils the following conditions, namely:— 
 
(a) if its financial assets in the factoring business are more than fifty per cent of its total assets or such per cent as may be stipulated by the Reserve Bank; and 
(b) if its income from factoring business is more than fifty per cent. of the gross income or such per cent. as may be stipulated by the Reserve Bank.
 
Given the above pretext, it is clear that an NBFC principally engaged in the factoring business will be referred to as a Factor under the Factoring Regulation Act, 2011. 
 
For the purpose of definition of factoring business, it can be construed basis that the business has two limbs first being assignment of receivables and second being financing / lending against receivables. However, if one was to read the Preamble of the Act, the focus of the Act was to facilitate assignment of receivables. Therefore, the larger construct and substantive clauses in the factoring Act deals with assignment of receivables as also is evident from the reading of Chapter III onwards of the Factoring Act. 
 
Following chart is a graphical representation understanding of factoring business by entities as specified in the Act and the kind of business they may undertake to qualify to be a factor:

User

COMMENTS

TIHARwale

11 months ago

where is Canara Bank floated factoring arm. gone down the drain. Banks do finance advances against supply bills factoring is identical to that.

Bank union perceives merger of associates with SBI
Chennai : A major union in the banking sector, All India Bank Employees' Association (AIBEA) apprehends the uniform service condition between the State Bank of India and its five associate banks as sort of a precursor for merger, said a top union leader.
 
The union on Thursday said it would go ahead with the January 8 strike as the management of the five associate banks of State Bank of India (SBI) is firm on implementing service conditions unilaterally.
 
"We do have the apprehension that common service conditions between SBI and its five associate banks is a step towards merger of the five banks with SBI," C.H. Venkatachalam, AIBEA general secretary, told IANS on Thursday.
 
According to him, already there is uniformity in technology, branding, work procedure, usage of ATMs by the account holders of the six banks.
 
The five associate banks of the SBI are State Bank of Mysore, State Bank of Patiala, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, and State Bank of Travancore.
 
Speaking about the strike on January 8, Venkatachalam said the conciliation meeting held on Wednesday by the chief labour commissioner (CLC) in New Delhi was a failure.
 
He said the management of SBI's five associate banks remained steadfast on implementing the new Career Progression Scheme (CPS) for their employees, violating the bilateral agreement with the union.
 
According to Venkatachalam, the five banks want to abolish permanent cadres like sweepers and outsoucre their labour activity, but this cannot be done unilaterally.
 
In a statement on Thursday, the AIBEA said at the conciliation meeting on Wednesday the CLC had advised the management of associate banks to put on hold the implementation of new service conditions.
 
The CLC also advised the bank management to find an amicable solution through mutual discussion.
 
The bank managements were not agreeable to the CLC's advice and the talks failed, forcing the employees to go on a strike soon after the New Year is rung in.
 
"We also informed the CLC that IBA (Indian Banks' Association), having signed the settlement on behalf of the banks based on their mandate, cannot remain a spectator when the terms of the settlement are violated by any of the banks and has to play its role to ensure proper implementation. Otherwise it would lead to chaotic situation and result in serious industrial disputes and conflicts," Venkatachalam said. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)