JD to shake up fi­nance biz

In­dus­try an­a­lyst says that the spinoff­may be a bid to repli­cate suc­cess of Alibaba’s Ant Fi­nan­cial

China Daily (Canada) - - NEWS CAPSULE - By FANFEIFEI fanfeifei@chi­nadaily.com.cn

China’s sec­ond-largest e-com­merce firm JD.com Inc an­nounced it will re­or­ga­nize its in­ter­net fi­nance busi­ness JD Fi­nance, to trans­form it into a com­pany with only Chi­nese in­vestors as share­hold­ers, a move­which­doesn’t rule­out­the pos­si­bil­ity of seek­ing a list­ing on do­mes­tic stock ex­change.

The Nas­daq-listed on­line re­tailer said it is ex­plor­ing a pos­si­ble re­or­ga­ni­za­tion of JD Fi­nance, while re­leas­ing its third-quar­ter fi­nan­cial re­sults on Tues­day night. It is cur­rently con­tem­plated that JD.com will dis­pose of all its eq­uity stake in JD Fi­nance so that JD.com will hold nei­ther le­gal own­er­ship nor ef­fec­tive con­trol of JD Fi­nance.

The re­or­ga­ni­za­tion is to make JD Fi­nance a wholly Chi­nese-owned en­tity to fa­cil­i­tate its devel­op­ment in cer­tain li­censed fi­nan­cial ser­vice busi­nesses in China and take ad­van­tage of the liq­uid­ity pro­vided by the Chi­nese cap­i­tal mar­ket, ac­cord­ing to a state­ment by JD.com.

The state­ment also said JD.com’s Chair­man and CEO Richard Liu in­tends to par­tic­i­pate in the trans­ac­tion by ac­quir­ing a mi­nor­ity eq­uity stake in JD Fi­nance at the same mar­ket price as third­party in­vestors.

The com­pany an­nounced its net also rev­enue reached 60.7 bil­lion yuan ($8.9 bil­lion) in Q3, an in­crease of 38 per­cent year-on-year.

Its to­tal gross mer­chan­dise vol­ume for the third quar­ter in­creased by 43 per­cent to 158.8 bil­lion yuan, while op­er­at­ing cash flow was 6.6 bil­lion yuan in­flow, com­pared to 1.4 bil­lion yuan out­flow for the same pe­riod last year.

Liu said ear­lier this year that the com­pany will cre­ate more than two listed com­pa­nies in the next three to five years, apart from JD.com which is listed on theNas­daq.

The move is sim­i­lar to Ant Fi­nan­cial Ser­vices Group, the fi­nan­cial af­fil­i­ate of e-com­merce gi­ant Alibaba Group Hold­ing Ltd. It was split off from Alibaba and ob­tained busi­ness in­de­pen­dence in 2014, mak­ing it a pow­er­ful fi­nan­cial player so far. It is seek­ing its ini­tial public of­fer­ing as soon as this year, ac­cord­ing to me­dia re­ports.

“The re­or­ga­ni­za­tion will ben­e­fit the all-around devel­op­ment of JD Fi­nance’s busi­nesses as its cur­rent fi­nan­cial pay­ment busi­ness is re­stricted by re­lated laws and reg­u­la­tions,” said Lu Zhen­wang, an in­ter­net ex­pert and chief ex­ec­u­tive ofWan­qing Con­sul­tancy in Shang­hai.

Lu added the in­de­pen­dence of JD.com’s fi­nan­cial arm will fa­cil­i­tate the com­pany to fi­nance, at­tract lo­cal in­vestors and share­hold­ers, and bet­ter carry out di­ver­si­fied fi­nan­cial busi­nesses, in or­der to yield more prof­its and also make prepa­ra­tion for its fu­ture list­ing.

Li Chao, an an­a­lyst with iRe­search Con­sult­ing Group, said it is an in­evitable trend that JD Fi­nance is split off from JD.com to ex­pand its busi­ness, as we al­ready have suc­cess­ful cases re­lated to in­ter­net fi­nan­cial com­pa­nies, such as Alibaba’s Ant Fi­nan­cial.

JD Fi­nance raised $1 bil­lion in new funding in Jan­uary. The in­vestors in­cluded Se­quoia Cap­i­tal China, China Har­vest In­vest­ments and China Taip­ing In­sur­ance, and with the new fi­nanc­ing, JD Fi­nance is val­ued at $7 bil­lion.

The busi­ness scope of JD Fi­nance now cov­ers sup­ply chain fi­nance, con­sumer fi­nance, wealth man­age­ment, crowd funding, in­sur­ance and se­cu­rity. The com­pany is striv­ing for fi­nan­cial ser­vice li­censes as the coun­try’s mid­dle class surges in size.

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