PE-backed Ant Group files for Hong Kong, Shanghai IPO
Ant Group, the financial technology affiliate of China’s Alibaba Group, which has raised more than $20 billion in external private funding, has filed for a dual listing in Hong Kong and Shanghai.
The company – best known as the parent of Alipay, the largest digital payments platform in China with 711 million monthly active users (MAUs) – previously said it wanted to sell a 10% stake. The company will trade on Hong Kong's main board and Shanghai's Star Market. The target valuation is reportedly in the $200-300 billion range, suggesting an IPO of $20-30 billion. Alibaba raised $25 billion in its US offering in 2014. The
Ant Group’s most recent private funding round in 2018 was completed at a valuation of $150 billion. That round – the Series C – saw the company raised $10.3 billion in US dollar-denominated equity funding and a further RMB21.8 billion ($3.2 billion) in renminbi from the likes of GIC Private, Warburg Pincus, The Carlyle Group, and Canada Pension Plan Investment Board (CPPIB). Investors in the international tranche will be allocated H-shares in conjunction with the Hong Kong offering.
Ant Group’s prospectus offers insights into the scale of the business. Created in 2004 and spun out from Alibaba in 2011 due to concerns about foreign ownership of payments platforms, the company now sits at the head of a financial technology ecosystem that takes in consumer and small business credit, investment, and insurance services.
Alipay alone processed RMB118 trillion in domestic transactions during the 12 months ended June, with a further RMB622 billion transacted offshore. The platform claims to reach one billion users and 80 million merchants, generating most of its revenue by charging fees to merchants based on transaction size.
Beyond that, Ant Group has “established the ‘capillaries’ of the financial system to complement the ‘arteries’ operated by major financial institutions,” enabling banks to tap into its customer base and technology. It is China’s largest online credit services provider, working with approximately 100 banks to facilitate RMB1.7 billion in consumer credit and RMB422 billion in small business credit for the 12 months ended June. Partners include Mybank, an online-only lender Ant Group helped set up.
Over the same period, the company’s investment services platform distributed products RMB4.1 trillion in partnership with 170 asset managers. Ant Group uses artificial intelligence solutions to match investment products with customers based on their risk tolerance. Meanwhile, the company helped 90 insurance companies generate RMB52 billion in premiums and contributions.
The insurance technology operation started in 2010 as a shipping return insurance product offered to users of Alibaba’s Taobao C2C platform. The credit business was launched in 2014 with Huabei, an unsecured revolving credit product intended to cover daily consumer expenses and then Jiebei for larger-ticket transactions. Investment services originated in 2013 from Yu’ebao, an in-house money market fund that enabled Alipay users to generate a return on their unutilized cash balances.
Ant Group has also established itself as a prolific investor in start-ups. In addition to a 30% stake in Mybank, the prospectus mentions a 30% interest in One97 Communications, operator of Indian e-wallet Paytm, and Zomato, an Indian restaurant aggregator and food delivery business. With the latter, Ant Group warns that it had to reevaluate the timing of an additional investment due to a change in local foreign investment regulations that add a layer of approvals for Chinese parties.
As of June, the company had RMB26.5 billion invested in entities and joint ventures – such as Mybank and One97 – where it has significant influence or joint control. These investments generated losses of RMB3.1 billion in 2019. There are also minority investments in start-ups with a combined value of RMB35.9 billion as of June.
Ant Group’s overall revenue came to RMB120.6 billion in 2019, up from RMB85.7 billion a year earlier. For the first six months of 2020, it was RMB72.5 billion. The digital payment, credit, investment and insurance contributions were 35.9%, 39.4%, 15.6%, and 8.4%, respectively. Net profit rose from RMB2.2 billion in 2018 to RMB18.1 billion in 2019. It was RMB21.9 billion in the first six months of 2020.
Prior to the Series C, Ant Group raised RMB19.2 billion in Series A funding at a valuation of $43 billion in 2015 and RMB29.1 billion in Series B funding at a valuation of $60 billion the following year.
China’s National Council for Social Security Fund, which took part in the Series A, is the largest external shareholder with a 2.94% interest. Alibaba has 32.65%, while entities controlled by Alibaba founder Jack Ma hold 50.52%. Percentage share ownership for the 45 entities that participated in the international tranche of the Series C are not given.
The size and pricing of the offering have yet to be decided.
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