Companies & Sectors
Fitch says outlook on realty sector negative in second half of FY13

According to the ratings agency, RBI's caution on interest rate cuts and high EMIs will continue to be a deterrent for potential home buyers

 
Mumbai: Indian real estate sector faces a negative outlook in the second half of the year mainly due to sluggish demand, high construction costs and liquidity pressures, reports PTI quoting Fitch Ratings.
 
"The domestic real estate sector continues to be negative for H2 of 2012, due to persistent sluggish demand, high construction costs and liquidity pressures," Fitch Ratings said in its report.
 
The agency observed that RBI's caution on interest rate cuts and high EMIs will continue to be a deterrent for potential home buyers.
 
"This, together with high property prices and elevated inflation, will keep demand sluggish," it said, adding however, the year-on-year (y-o-y) growth of home loans by banks, which had been slowing since the past 12 months till April, picked up markedly in May and June 2012 and if continued, may help spur the sector.
 
It further opined that the general slowdown and subdued job growth in the IT sector, which was at its lowest quarterly level so far, will hold back demand for commercial and retail properties.
 
Fitch also said real estate companies will continue to face margin compression from high construction costs for both building materials and labour.
 
"From last December to this April, the price of steel rose 13% while cement by 12%. Notwithstanding the trend of deleveraging since the third quarter of 2011, slowing demand, high costs and thus declining profits will keep leverage high for most realty companies," it said.
 
Reliance of real estate companies on operating cash flow will assume significance in the near-term as available funding options remain limited, the rating agency said.
 
Growth of bank lending to the commercial real estate sector was low at 1.5% y-o-y in the June quarter, it pointed out and said, "Except for some pick-up in private equity, other funding options are restricted. As a result, companies that derive significant revenue from lease rentals will have a more stable credit profile compared to their counterparts, whose business model is based on outright sale."
 

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Social networking boosts e-commerce market

Social commerce continues to gain popularity around the globe, especially in the US, with the rising popularity of e-gifting, under which users send tangible gifts to their loved ones from retailers through Facebook and email

 
Mumbai: Increasing social networking will give a big boost to the already burgeoning e-commerce market in India that has touched the Rs50,000 crore-mark last year, reports PTI quoting a recent industry study.
 
The social media population hooked onto Facebook, Twitter, etc has risen many folds and they have widened the scope of social commerce, it said.
 
According to latest Internet and Mobile Association of India, with 150 online populations, the country is the third largest in terms of internet users after China and the US. Out of this, 50 million are on Facebook and 13 million on Twitter, taking the size of social media universe to 63 million.
 
This also makes the country the second largest Facebook market after the US, while the sixth largest for Twitter, says ICICI Merchant Services and First Data general manager Amrish Rau, adding most of these social media members are also actively taking up e-commerce transactions.
 
"Going by the current growth rates, social e-commerce is the next step in evolution, combining the comfort and ease of use of social media and e-tailing," says Rau.
 
Social commerce continues to gain popularity around the globe, especially in the US, with the rising popularity of e-gifting, under which users send tangible gifts to their loved ones from retailers through Facebook and email, he added.
 
ICICI Merchant Services and First Data is a joint venture between the country's private sector bank major and the US Corporation, which is a global leader in electronic commerce and payment services.
 

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Saab, Spyker file $3 billion claim against General Motors

Saab, the Swedish carmaker filed for bankruptcy in December after its attempts to raise funds in China were thwarted by GM, which had previously owned Saab and refused a transfer of patents needed for the Chinese deal to go through

 
The Hague: Dutch carmaker Spyker said it has filed a three-billion-dollar claim in a US court against General Motors (GM), whose actions it said led directly to Swedish Saab's bankruptcy last year, reports PTI.
 
"The lawsuit seeks redress for the unlawful actions GM took to avoid competition with Saab Automobile in the Chinese market," Saab's owner Spyker said in a statement issued in Zeewolde in the Netherlands.
 
The Swedish carmaker filed for bankruptcy in December after attempts to raise funds in China were thwarted by GM, which had previously owned Saab and refused a transfer of patents needed for the Chinese deal to go through.
 
"GM's actions had the direct and intended objective of driving Saab Automobile into bankruptcy, a result of GM's tortiously interfering with a transaction... to restructure and remain a solvent growing concern," Spyker said in the statement.
 
Detroit-based GM said in an email to AFP its lawyers "would review the lawsuit and respond in due course." 
 
Spyker said it would pay for Saab's legal costs in the case filed in Michigan's Eastern District Court, in return for a "very substantial share of Saab Automobile's award when the proceedings are successful." 
 
Chinese carmaker Youngman had long been interested in buying Saab and tried to snap it up before it declared bankruptcy -- but its efforts were stymied by Saab's former owner GM, which balked at transferring the necessary technology licences.
 
"GM took all the steps to prevent us to make a deal with Youngman," Spyker's chief executive Victor Muller said during a telephone conference call, adding "it was evident that General Motors has deliberately pushed Saab over the cliff." 
 
Separately GM said yesterday that its joint ventures in China sold a record 1,99,503 vehicles in July, a 15.1% increase from last year's previous high for a single month.
 
Muller added the $3 billion claimed in compensation represented the value Saab would have had, had the deal with Youngman go through.
 
He said that if the lawsuit was successful, "90% of its proceeds would go to Spyker." 
 
The Dutch company estimated legal costs at "between one to two million euros." 
 
"Any money that goes into Saab will be considered Saab's assets and might be distributed to the company's creditors," Muller added.
 
Bankruptcy administrators said in April that Saab had assets to cover just over a third of its debt of 13 billion kronor.
 

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