As a small business owner and entrepreneurship consultant, I‘ve watched Evergrande‘s growth story with great fascination over the years. It‘s fair to say that, the Evergrande Group has had a lot of controversies. We’re going to explore why that happened by diving deep into Evergrande Group statistics and financials.
Fueled by Debt-Funded Growth
Evergrande‘s business model relied on heavy borrowing to finance aggressive land buys and project development. This fueled rapid expansion, with revenues rising 10x from $45B in 2010 to $507B in 2020. But debt was mounting even faster:
- Total liabilities soared 3x between 2015-2020 to $1.9 trillion
- Gearing ratio dropped from 87% to 31% as debts still outpaced assets
- 78% of staggering $300B debts owed to Chinese banks & bondholders
As a fellow entrepreneur, I understand the temptation towards fast growth. But Evergrande took on financial risk far too recklessly, over-leveraging itself to unsustainable levels.
Strength in Numbers: Scale of Evergrande‘s Empire
Fueled by debt, Evergrande built China‘s 2nd largest real estate empire spanning 280+ cities:
- 1,300+ property developments across China
- Enough land to cover all of Manhattan island
- 12 million homeowners housed under Evergrande
- 3.8 million indirect jobs supported annually
To put Evergrande‘s scale into context, it has supported more jobs than Los Angeles‘ entire workforce through construction and housing-related industries. And over 12 million homeowners rely on its properties – exceeding Greece‘s entire population.
This massive size is a double-edged sword: while powering revenue growth for years, Evergrande‘s sprawling empire is now too big to fail for China.
By the Numbers: Evergrande’s 2020 Financial Snapshot
Let’s examine Evergrande’s finances as of end of 2020, when revenues hit their peak:
- Revenue: $507B
- Net profit: $31B
- Total assets: $306B
- Contracted sales: $110B from 80M+ sq meter properties
With contracted sales hitting $110B that year, Evergrande seemed to be soaring. But as a business consultant, I would have advised them that large incomes can conceal dangerous risk exposure.
And in 2021, the timebomb of debt exploded:
- Contracted sales plunged 95% by Dec 2021 to $5B
- Missed payments on $300B debts in mid-2021
- Default risks soaring amid collapsing buyer confidence
Now Evergrande is struggling to raise capital to pay its towering debts. It poses systemic risk to China’s economy and global markets. For small business owners like myself, there are important lessons here on sustainable growth models.
Table: Evergrande Revenue, Assets, Gearing Ratio
| Year | Revenue (USD) | Total Assets (USD) | Gearing Ratio |
|---|---|---|---|
| 2015 | $133B | $104B | 87% |
| 2020 | $507B | $306B | 31% |
Who Bears the Brunt? Homebuyers & Employees
Beyond investors, Evergrande’s collapse threatens the livelihoods of millions:
- 12M+ homeowners face construction halts and plunging property values
- 3.8M indirect employees may lose jobs as projects stall
As an entrepreneur, my priority is always serving vulnerable groups – like Evergrande‘s customers and staff facing turmoil through no fault of their own. This human impact is too often overlooked when analyzing corporate failures.
There are also ripple effects across China’s $50 trillion housing market, sparking protests among homebuyers and suppliers stiffed on pay. Real estate drives 29% of China‘s GDP, so an industry slowdown can quickly spiral.
Key Takeaways as an Entrepreneurship Consultant
So what lessons can fellow entrepreneurs take from Evergrande’s template for meteoric growth that crashed under massive debt burdens? Here are my consultant perspectives:
1. Fast expansion through over-leverage can risk collapse. Optimize for sustainable growth rates aligned with revenues.
2. Oversized empires lose agility to correct course. Maintain lean operations that can rapidly adapt to market changes.
3. Transparency & governance matter. Rapid growth can conceal mismanagement; ensure financial discipline through oversight.
At its core, Evergrande shows the importance of balancing ambitious expansion plans with financial stability. For small business owners like myself, it‘s a cautionary tale of uncontrolled debt-fueled growth ending in disaster for shareholders, customers, employees and China‘s vibrant real estate ecosystem.
