Platinum Investment Takes 5.16% Stake In Unitech

Australia's Platinum Investment Management Ltd has raised its stake in Unitech Ltd to 5.16% over the past month by investing $125 million, a person familiar with the matter said Monday.

Before the transaction, the Australian fund held a 1.19% stake in the company and the person, who spoke to Dow Jones Newswires on condition of anonymity, said Platinum may continue to raise its holding in the Indian property developer.

Platinum acquired the stake in phases from the open market, Unitech earlier said in a filing with the Bombay Stock Exchange, but didn't provide details like the cost of the transactions.

Unitech is among companies which face investigations over a 2008 government allotment of licenses to provide mobile telecommunication services.

According to the Central Bureau of Investigation and a federal audit body, the licenses were sold deliberately at prices sharply below market levels, resulting in huge losses to the government.

Unitech Wireless Ltd was one of the companies that got the licenses. Unitech later sold a 67.25% stake in the telecom business to Norway's Telenor ASA for about 61.36 billion rupees, and Unitech Wireless now offers services under the Uninor brand.

Despite its telecom troubles, analysts expect Unitech's shares to offer good returns in the near term, given its land bank.

"The discrepancy between Unitech's stock price and land valuation is wide at the moment," Saurabh Kumar and Gunjan Prithyani, analysts at J.P. Morgan, wrote in a recent report.

The stock has declined 60% since September and property prices in two of its key markets--Gurgaon and Noida--have been rising, they said. "The stock is trading at a 40% discount to its land value, which we believe is cheap," they said.

Price Correction Expected in Mumbai Residential Segment

A study by rating agency Crisil has forecast a fall in home prices in Mumbai as interest rates inch upward. However, the National Capital Region, where prices are still 15-20% lower than their peak levels in 2007, will continue to see an appreciation in real estate, it said.

“In Mumbai, falling demand, owing to diminished affordability, and rising interest rates will trigger a decline in prices in 2011. Property prices soared by 43% in 2010 in the city’s three major supply pockets. Prices thus surpassed their peak values, attained in the first half of 2008, by 26%,” the report said, adding that prices in Mumbai will fall by 8-10% in 2011.

Earlier last week, real estate firms like Jones Lang LaSalle India and Cushman & Wakefield had forecast a correction in real estate prices in 2011. “A likely increase in interest rates by the Reserve Bank of India will subdue demand and depress housing prices in Mumbai in 2011. In NCR, relatively better affordability will prop prices despite any increase in interest rates,” said Nagarajan Narasimhan, director – Crisil Research.

In Mumbai, the extent of the price decline would vary widely by area. Prices in premium locations like South and Central Mumbai, which have an excess supply of houses priced at more than Rs 5 crore, would decline by 15-20% over the next 12 months. Prices will decline more moderately, by about 6%, in areas like Vasai and Virar, where affordability would be relatively better, Crisil said.

Crisil Research studied the price trend in three major supply pockets in Mumbai and NCR—western suburbs (Goregaon, Malad, Kandivali and Borivali), Thane (Ghodbunder Road), and central suburbs (Dombivli and Kalyan) in Mumbai, and Noida and the outskirts of Ghaziabad and Faridabad in NCR. Accounting for more than 50% of total planned supply in each city, these major supply pockets would represent the trend in housing prices in the whole city. Mumbai and NCR would together account for more than half the 1.5 billion sq ft housing supply planned in India’s 10 leading cities up to 2013.

Britain Asks India to Open up Retail Sector

Britain wants India to open up retail sector and further liberalise defence and financial services to promote economic growth and deal with the food security problem. The issues are likely to come up for discussion during the visit of UK’s Secretary of State for Business, Innovation and Skills Vince Cable who is arriving in India on January 17 on a three-day visit along with a 50-member business delegation. “We want to talk to the government about opening up areas of retail, defence where this debate is going on… Defence Minister yesterday made announcements about the private sector’s involvement in the defence sector,” British High Commissioner to India Richard Stagg told reporters.

At present, the government allows 51 per cent FDI in single brand retail and 100 per cent in the cash-and-carry (wholesale) formats, while FDI in multi-brand retail is prohibited. In defence and insurance sectors, 26 per cent FDI is permitted. The UK has strong expertise in areas like retail, infrastructure, energy, financial services and defence. The visit is aimed at further identifying opportunities for British and Indian companies to work together to realise ambitious goals of economic growth in areas like infrastructure development, Stagg said.

Besides, Cable would chair the meeting of the US-India Joint Economic and Trade Committee (Jetco) with Commerce and Industry Minister Anand Sharma. It was set up in 2005 to tackle trade and investment barriers on both sides and promote business links. The 6th Jetco meeting was held on 4 February last year in London. Cable would also attend the launch of British India Infrastructure Group which would be co-chaired by Permanent Secretary of the Department for Business, Innovation and Skills Martin Donnelly and Finance Secretary Ashok Chawla.

“There are enormous opportunities available in India’s infrastructure sector. British companies have expertise in the sector and can help in the infrastructure development of the country,” Stagg said. The government has planned to invest USD 1 trillion in the infrastructure sector during the XII Five-Year Plan (2012-2017). Besides, Cable would hold meetings with Road and Transport Minister Kamal Nath and Minister for Corporate Affairs and Minority Affairs Salman Khurshid.

“Cable will also look at corporate governance which is very important particularly at a moment when we move towards more global standardisation. We see more opportunities for both countries to work more closely together in this regard,” Stagg said.
During 2009-10, India-UK bilateral trade stood at USD 10.6 billion.

Slowdown Hit Indian Retail Sector can Witness Growth in 2011: Fitch

After going through a downturn, the Indian retail sector is likely to show positive results this year with several firms witnessing buoyant sales, improved capital management and stable margins, according to ratings agency Fitch. “Retailers in the country are likely to benefit from buoyant sales, improved working capital management and stable margins,” Fitch India said in its report ‘2011 Outlook: Indian Retail’. The retail sector had suffered massively during the 2008-09 downturn with many firms closing stores and holding back on expansion.

The report said the total debt is expected to increase in most cases to fund growing capex requirements as companies focus on cementing their market share and retail footprint. “However, debt levels are likely to be supported by higher operating profits and consequently leverage levels should remain stable and are likely to improve,” it said.
The agency also said it expects liquidity to remain comfortable, led by efficient working capital management.

“Improvements are expected from better inventory management and lower lease deposit levels,” it added. Besides, retail firms are likely to witness stable operating margins this year, depending on each company’s choice on product category. “This, in addition to economies of scale, private label sales mix and discounts from suppliers will help strengthen margins,” the agency said. The report also said small retailers and new entrants are likely to go more aggressive this year, while large players are also likely to face lesser risk in executing their expansion plans.

“Given the size and scale achieved by larger retailers such as PRIL and Shopper’s, their capex execution risk has reduced considerably in line with their reduced pace of expansion,” the report said.