PE-backed Chinese SaaS player pursues US IPO

In addition to 51job and CBC, which own 20% and 14%, respectively, Investor AB has 12%, Morgan Stanley Private Equity Asia, holds 10%, CSV Capital Partners has 9.4%, and Eight Roads has 6.5%, according to a filing.

Established 15 years ago, CDP offers a comprehensive suite of human capital management services, covering payroll, tax and social security management, benefits programs, and workforce management. It serves over 3,600 customer entities representing 1,000 companies and one million user accounts.

CDP claims to be the largest SaaS-based payroll and benefits service provider in China by number of group customers served. It is also among the top three players in China for cloud-based workforce management services in terms of revenue.

Despite its dominant market position, the company still bears losses. Net revenue rose 52.7% year-on-year to RMB744.8 million ($104.2 million) in 2018, yet the net loss more than tripled to RMB31.2 million. The trend of costs growing at a faster pace than sales continued in the first nine months of 2019. While revenue expanded 28% year-on-year to RMB674 million, CDP's net loss grew from RMB16.9 million to RMB157.5 million.

The company raised about $10 million in Series B funding in 2006, co-led by Investor AB, Fidelity Growth Partners Asia - which controls Eight Roads - and Sumitomo Corporation Equity Asia. The series C round came in 2012 and was led by CBC. Mogan Stanley led another round in 2016, according to AVCJ research.

CDP says that its cloud-based infrastructure enables a team of 17 employees to serve over 17,000 associates who work for customers. The platform, accessed by employees via mobile and PC devices, is designed as a one-stop service. Its application programming interfaces allow organizations to consolidate existing systems, vendors and processes within the platform. In 2018, it achieved a retention rate of 98.7% for group customers that individually contributed more than RMB500,000 in net revenue.

CDP originally targeted global organizations but has observed increasing demand from local businesses. “Propelled by technological development and capital investments, a large number of local champions have emerged across sectors. Many of these companies have grown at exceptional paces and have nationwide presence, both of which make it challenging to staff and manage their workforces," the prospectus says. "To address the huge and growing staffing demands, we have built our workforce management services to enable long-term growth of our customers.”

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• Topics
• Greater China
• IPO
• Technology
• TMT
• China
• China Broadband Capital
• Eight Roads
• Morgan Stanley Private Equity Asia