Alibaba Group’s Internet finance arm Ant Financial plans to raise 3.1 billion at a valuation of more than $50 billion.
Alibaba’s Ant Financial Services Group which currently owns China’s largest e-payments platform Alipay is currently valued at over $50 billion ahead of its IPO. The hefty valuation is a clear sign of the country’s growing appetite for Internet finance services.
People familiar with the matter said that Ant Financial would complete a $3.1 billion funding round from a series of private investors by mid-April. The cash will help the firm buy large stakes at China’s key companies including the country’s Postal Savings Bank and lottery business.
The extra money will also give Ant Financial an edge ahead of its IPO, which is the most anticipated IPO in China at the moment. Analysts expect the share offering to occur at some point next year, and eventually on the country’s stock market since the funding round was designed for yuans, not foreign currencies.
In China, it is rather common for private investors to heavily invest in financial tech companies and valuate them for mind-blowing figures. For instance, tech giant Tencent Holdings’s WeBank, which directly competes against Ant Financial’s MYBank, currently has a $5.5 billion valuation after just one year.
Furthermore, financial tech companies are more appealing than China’s brick-and-mortar banks because they run on a lower risk. Ant Financial and similar companies reassure investors that their analytics and heaps of customer data help them stay away from risky small borrowers.
Plus, small borrowers have often been overlooked by big banks in China, because it was less risky to lend big money to state-run companies. Yet, these companies are now threatened by e-commerce giants such as JD.com and Alibaba.
Ant Financial’s Alipay e-payment service was previously held by Alibaba. But Alibaba’s CEO Jack Ma thought it was more suitable for the payment unit to be put under Alipay’s umbrella. Though Alibaba’s major investor Yahoo was against the move, Ma argued that Alipay needs to be a domestic company to be able to run certain financial operations under Beijing’s new regulations.
Alibaba had a $25 billion IPO two years ago, but that didn’t benefit Ant Financial. By contrast, any sum collected from Alipay’s IPO could be cashed in by Alibaba. Plus, most top executives in the financial tech company are also Alibaba’s senior executives. Ma himself has a small stake in Ant Financial.
Moreover, the two companies often join forces to ink key deals such as securing a controlling stake in AGTech Holdings Ltd, a popular sports lottery firm.
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