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Global Story of the Week – Evergrande – another 2008 crisis?

What a week it has been for the global markets. Let’s start by looking at what happened here for Evergrande – “One of the biggest Chinese real estate”.

Well, this isn’t surprising for many analysts following the Chinese property bubble for a very long time. For a very long time, China has followed a build and grow model and it wasn’t until recently that they realized that the market has overheated and excessive cheap debt could collapse the industry altogether. Thus, in the recent move to curb this, the Chinese government has come up with regulations limiting the biggest infra companies from taking debt beyond certain thresholds.

The most recent result of this move is – Evergrande. But the bigger question is – Would it lead to another 2008 global crisis?

The answer is “No”. Though Evergrande is one of the biggest debt-infra companies, exposure and risk were well defined and correctly identified in bond issuance compared to what happened in 2008. On the other side, the risk exposure is expected to be majorly limited to China. Read more about it here.

Indian Story of the Week – Oyo plans for IPO

Based on reports from Economic Times, OYO can file for IPO as soon as early October. OYO is aiming for ~$1.2Bn at a valuation of ~$15Bn by the issue of fresh shares. The company was valued at ~$9Bn in its recent strategic partnership with Microsoft earlier this year.

Some of the current investors are expected to liquidate their position, while, OYO founder- Ritesh is expected to keep his current 30% into the company.

Based on recent reports, the company is recovering at a good pace post Pandemic and is expected to reach per-COVID levels soon after the coming holiday season. OYO has also recently announced the $600Mn debt financing from institutional banks to serve the current loan.

If successful, OYO would be the 7th tech Indian giant entering the IPO this year.

Global Market Update

Global Equity Market –

The S & P 500 experienced the global impact of Evergrande in the initial part of the week but was quick to make the recovery owing to the recent Fed meeting. The Fed has recently announced that they would continue to flush money into the market but we can expect tapering to come sooner.

S&P 500

Companies In Focus

  1. Netflix completed its acquisition of the works of children’s author Roald Dahl, author of “Charlie and the Chocolate Factory” and “Matilda.”
  2. Cars24, an Indian used-car marketplace, raises $340 Mn at $1.84 Bn post-money valuation. SoftBank Vision Fund 2 led the round.
  3. FloBiz, an Indian neobank for SMEs, raised $31 million in Series B funding. Sequoia Capital India and Think Investments co-led, and were joined by insiders Elevation Capital and Beenext.
  4. Freshworks, India based startup, completes successful $1Bn Nasdaq IPO.

Thanks for Reading!

Shubham Agarwal (CFA L2 Candidate | MBA candidate at University of Cambridge, UK)

Want to discuss this further or have questions regarding finance/strategy? Feel free to connect here – https://www.linkedin.com/in/shubhamagarwal13/

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