PE-backed China dental player files for Hong Kong IPO
Arrail Group, a leading Chinese dental chain that has raised about $400 million in private funding since 2010, has filed for a Hong Kong IPO.
It comes less than three months after Temasek Holdings led a $20 million Series E round for the company. That round included support from OrbiMed, Hong Kong-based Ward Ferry, Hina Group, Industrial Bank, and Korea-based Mirae Asset Global Investments.
Goldman Sachs and Hillhouse Capital provided a $90 million Series D in 2017. Previous investors also include GL Capital, KPCB China Fund, New Horizon Capital, Prometheus Capital, Qiming Ventures, Commonfund Capital, and Principal Investment Area.
Arrail focuses on the mid-to-high-end market, offering general therapy, cosmetic dentistry, dental implants, orthodontics, and children's dental care, among other services. It operated 107 hospitals and clinics providing mid- to high-end dental care services in 15 predominantly tier-one and tier-two cities across China, with 856 experienced dentists, as of May.
The company operates under a dual-brand strategy comprising Arrail for the premium segment and middle-class offering Rytime, which was launched in 2012. It notes that the size of premium private dental services market in China has increased from RMB1.3 billion ($201 million) in 2015 to RMB2.6 billion in 2020, citing data from Frost & Sullivan.
More than 200 corporations, including some international technology companies, purchase the company’s dental services as benefits to their employees. However, individual patients account for more than 90% of revenue. Revenue increased 85% during financial 2021 to RMB1.5 billion, while the net loss grew from RMB325.8 million to RMB597.8 million.
“We are well-positioned to capture the enormous market opportunities in China, especially in the premium market, leveraging our market leadership and deep understanding of China’s private dental services market,” the company said in a prospectus.
“Our growth is supported by powerful drivers such as increasing disposable income of the Chinese population, increasing per capita expenditure on healthcare services, rising awareness of dental health and aesthetics and favorable government policies.”
Goldman is the largest external shareholder with 8.24%. KPCB, Qiming, and Hillhouse own 6.35%, 5.54%, and 5.13%, respectively. No other investor has more than 5%.
Financial terms of the IPO were not disclosed.
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