Yinda plans to go public in 5 years

GUANGZHOU: Guangdong Yinda Guarantee Investment Group Co, a leading credit guarantee company in China, plans to go public in five years, Yinda President Li Sicong said.

The company recently received an injection of 160 million yuan from SAIF Partners, a Hong Kong-based private equity firm.

Li told China Business Weekly that domestic and overseas stock exchanges are both options.

"Our goal is to become a flagship and benchmark in this sector in China," Li said.

With SAIF having acquired 25 percent of its shares, Yinda became the first foreign-invested credit guarantee firm in Guangzhou, the capital of Guangdong province, and had its registered capital increased to 456 million yuan.

The company plans to increase its share capital to 700 million by the end of this year. With its subsidiaries also expanding, the share capital of the entire group should exceed 1 billion yuan later this year, he said.

Wanting at least 20 percent annual growth in profits, the company plans to restructure itself into a shareholding company early next year and expand into other regions in China, including the Yangtze River Delta area, Bohai Bay Rim and southwestern China.

Founded in 2000, Yinda occupies about 40 percent of the commercial credit guarantee market in Guangzhou and 20 percent of the Guangdong market (excluding Shenzhen, another city in the province).

The company had provided guarantees for nearly 20 billion yuan for a few thousand small and medium-sized enterprises (SMEs) in Guangdong by the end of last year and offered guarantees for 4 billion in the first eight months of this year, Li said.

Eight SMEs served by Yinda were seeking a listing on the NASDAQ-style second board in Shenzhen, he said.

Li said he saw the market as largely untapped. The global financial crisis has led to a greater demand from SMEs for funds and higher risks in the guarantee business.

Consisting of policy credit guarantee firms, commercial ones and the mutual guarantee business, the credit guarantee market in China came into being in 1999 and started to grow rapidly after 2005, Li said.

Lacking a complete set of standards and supervision, the sector remains largely unregulated.

There are 500-plus commercial credit guarantee firms in Guangdong and more than 200 in Guangzhou, but only up to 15 percent provide real guarantee services, Li said.

Li said that under his company's business model, Yinda has set up subsidiaries with various city governments in Guangdong to combine the trustworthiness of the government and flexibility of the market.

Li said a firm, steady pace is also important to avoid a crisis such as the one suffered by Shenzhen-based Credit Orienwise Group.

One of the leading guarantee firms in China, Credit Orienwise saw its foreign shareholders threaten to withdraw, reportedly due to excessive expansion, poor management and declining profits in the global economic downturn.

Li said SAIF will bring management know-how to Yinda to help enhance its brand.

Li said a better business environment for guarantee firms is important, pointing to the need for supervision, standards and a trade association.

To boost the credit worthiness of the guarantee sector, the Guangdong provincial government formed Guangdong SME Credit Reguarantee Co in February, with registered capital of 2 billion yuan.

Yinda was one of the first guarantee firms to sign strategic cooperation pacts with the new company.

One of the economic hubs in China, Guangdong is home to 3.6 million SMEs.

Among them, more than 1 million are considered "real" SMEs with relatively significant business, Guangdong Vice Governor Song Hai said in June.

Among the 1 million SMEs, he said only 180,000 had ever borrowed from banks, revealing the difficulty SMEs have in raising funds.

SMEs in Guangdong raised funds totaling 1.16 trillion yuan during the first quarter of this year, according to the provincial economic and trade commission.

(China Daily 10/12/2009 page4)