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Funding plan lifts shares of Evergrande

By Qiu Quanlin in Guangzhou | China Daily | Updated: 2017-11-08 08:12

Property company inks capital infusion agreements with 6 strategic investors

Shares of Evergrande Group, a mainland property developer, rose 9.38 percent on Tuesday after it said it would sell 60 billion yuan ($9.04 billion) worth of stocks in its property assets business that is slated for a backdoor listing in Shenzhen.

The Guangzhou-based company said on Monday evening that it had signed a capital infusion agreement with six strategic investors, to finance its real estate business.

Evergrande shares closed at HK$30.9 ($3.96) in Hong Kong on Tuesday. The company's shares have surged nearly 500 percent this year in anticipation of the planned backdoor listing of its real estate assets, fresh capital from strategic investors and share buybacks.

According to the company's financial report for the first six months, Evergrande's net debt ratio will drop by nearly 40 percent after the introduction of the strategic investment.

This is the third time this year that Evergrande is introducing strategic investors, after two infusions of 30.5 billion yuan and 39.5 billion in January and June respectively.

"The largest equity financing in the history of domestic real estate enterprises and the introduction of investment reflects investors' approval of the development prospects of Evergrande. It also reflects the company's determination to increase efficiency, reduce debt and deleverage," said Lin Jiang, head of the public finance and taxation department of the Sun Yat-sen University.

The announcement also shows that Evergrande's net profit will increase to 165 billion yuan in the next three years.

Xu Jiayin, chairman of the board of directors of Evergrande, said earlier this year that the company will transform its development strategy of "scale" to "benefit", which features low debt, low leverage, low cost and high turnover.

Evergrande's sales reached 187.9 billion yuan in the first half of 2017, an increase of 114.8 percent year-on-year, according to the company.

"After the introduction of strategic investment is completed, Evergrande's net assets will increase substantially," said Lin.

As one of the strategic investors, Suning Holdings Group Ltd, which will hold 4.7 percent of shares of Evergrande Real Estate, will boost its online and offline business in the years ahead, according to Zhang Jindong, chairman of Suning.

"The partnership with Evergrande was based on both sides' products and services that are specially made for customers," Zhang told the National Business Daily.

In addition to the capital increase, both sides will cooperate in sectors such as finance, smart homes, property services and sales, he said.

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