Evergrande China's Lehman moment, reminds of IL&FS: Uday Kotak

Troubles at China's indebted developer Evergrande Group has rippled across the world, with global markets plunging as the fate of the real estate developer remains uncertain. Weighing in on the issue, Kotak Mahindra Bank MD and CEO Uday Kotak on Tuesday compared the situation of Evergrande Group with Lehman Brothers of the US.
 
The investment bank had filed for bankruptcy in 2008 which is considered to have played a big role in the global financial crisis of 2007-08. Kotak also said that the crisis at the Chinese real estate group reminds of the troubles at Infrastructure Leasing & Financial Services (IL&FS) Group in India.
 
"Evergrande seems like China's Lehman moment. Reminds us of IL&FS. Indian Government acted swiftly. Provided calm to financial markets. The Government appointed board estimates 61% recovery at IL&FS. Evergrande bonds in China trading ~ 25 cents to a $," Kotak said in a tweet.
 
 

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IL&FS had defaulted on its debt obligations in 2018, leading to a liquidity crisis in India's financial system. The Indian government later superseded the company's board with a new one under the leadership of Kotak.
 
The Kotak-led board discovered that there was a complex web of over 250 companies which were a part of the IL&FS Group, which had an outstanding of over Rs 94,000 crore to lenders.
 
Praising the Indian government's efforts, Kotak said its actions after the IL&FS default calmed the financial markets. He also added that the board appointed by the government estimates recovery for the group at 61 per cent.
 
The Evergrande Group has debt of around $304 billion, which includes borrowings, contract liabilities, trade payables along with current and deferred income tax liabilities. There are fears that the group may default on its payment obligations.

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