Evergrande China’s Lehman moment: Uday Kotak

MUMBAI: Kotak Mahindra Bank CEO Uday Kotak today said that the brewing crisis around Chinese real estate giant Evergrande could become the country’s Lehman moment.

“Evergrande seems like China’s Lehman moment. Reminds us of IL&FS,” Kotak said in a tweet on microblogging website Twitter.

Evergrande, China’s second largest real estate developer, has been in the midst of credit crisis over the past few years. However, a large chunk of the company’s $300 billion in liabilities are due to retire or up for interest payment this year.

The company is also facing a cash crunch after the Chinese government asked state-owned lenders to not extend fresh credit to the company, while it has billions of dollars in stuck real estate inventory. With the company due to make repayment to two banks on Thursday, all eyes are on the company on whether it will default.

Evergrande seems like China’s Lehman moment. Reminds us of IL&FS. Indian Government acted swiftly. Provided calm to… https://t.co/Ix6iKyQb7c

— Uday Kotak (@udaykotak) 1632204116000Kotak suggested that a swift response from the Chinese government will be around as he drew parallel between the Evergrande crisis with India’s own Lehman moment when “too-big-to-fail” shadow banker IL&FS went bust.

“Indian Government acted swiftly. Provided calm to financial markets,” Kotak said. The banker, who is non-executive chairman of IL&FS, said the government appointed committee on IL&FS expects to make 61 per cent of recovery on the debt owed by the non-bank lender.