Geelie Case Analysis

1770 WordsNov 6, 20118 Pages
Dear Mr. Li, Given the recent objective of Geeli becoming the world’s biggest air-conditioner manufacture within the next five years for which Geeli needs to raise $400 million (RMB 3.35 billion), I have looked into these areas based on the information available: 1. Current Company Position 2. Current Industry Position 3. Financing options 4. Recommendations Current Company Position Geeli has gained substantial market share of this industry under your leadership over the last decade. With Geeli’s present book assets approaching $400 million Geeli has enjoyed a steady growth in it’s revenue and stable cash flows. Additionally, the Geeli brand is valued at $350 million by the State Finance Bureau of China. Given this brand recognition…show more content…
Even though private placements are very new in China and only being legislated in 2005, it is expected to double by 2008. Advantages Set Backs - Easy and less time consuming - No Strict Compliance as listing - Less number of share holders - Allows company to be in a private status - High level of secrecy - Option of choosing investors who are aligned with the company - Lack of suitable investors - Opportunistic behavior by selling to interested party in large profits - Lack of funds - Little recognition than other public offerings Debt Options When China joined the WTO in 2001, its banking sector was in a very weak state, troubled by a serious non-performing loans (NPLs) problem. Thus, numerous measures like a large sum of government funds (roughly 20% of China’s GDP in 2004) have been provided to resolve the NPLs problems. Since 2003, China Banking Regulatory Commission (CBRC) was established to strengthen bank regulation and this has improved performance due to foreign competitors, lower transaction cost & easy administrative procedure for obtaining the loan with added tax saving. While Geeli has limited debt on its balance sheet there are still drawbacks with these options as emphasized below: Domestic Banks – Drawbacks • Government Policy dictated lending practice and most loan went to state

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