China’s Lu­fax tar­gets $2b in fresh fund­ing amid IPO de­lay

Lu­fax hired ive banks to work on an IPO in Hong Kong to raise up to $5 bil­lion in the irst half of 2018

The Gulf Today - Business - - INTERNATIONAL -

HONG KONG: China’s Lu­fax aims to raise up to $2 bil­lion in fresh fund­ing, valu­ing one of the coun­try’s largest on­line wealth man­age­ment plat­forms at $40 bil­lion, as it opts for pri­vate in­vest­ment ahead of a de­layed list­ing, said peo­ple fa­mil­iar with the deal.

Lu­fax, set up in 2011 by top in­surer Ping An In­surance Group Co of China Ltd, is work­ing with ad­vi­sors to raise eq­uity of at least $1 bil­lion, said the peo­ple, who de­clined to be iden­ti­fied as fundrais­ing plans are not public. They did not dis­close po­ten­tial in­vestors or time frame.

The firm, for­mally Shang­hai Lu­ji­azui In­ter­na­tional Fi­nan­cial As­set Ex­change Co Ltd, seeks to fund growth while its ini­tial public offering (IPO) is on hold due to chang­ing reg­u­la­tion in on­line con­sumer lend­ing, a core busi­ness, the peo­ple said. Lu­fax de­clined to com­ment. Lu­fax hired five banks to work on an IPO in Hong Kong to raise up to $5 bil­lion in the first half of 2018, Reuters pub­li­ca­tion IFR re­ported in De­cem­ber.

It post­poned the IPO amid un­cer­tainty in con­sumer lend­ing as au­thor­i­ties for­mu­lated reg­u­la­tion for the fast-grow­ing sec­tor un­der a broader cam­paign to curb fi­nan­cial risk, sources said.

Un­der a pro­posal cir­cu­lated in De­cem­ber, on­line mi­cro-lenders will need to be li­censed and will be pro­hib­ited from lend­ing to bor­row­ers with no sources of in­come or no spe­cific pur­poses for the funds.

LOAN BAL­ANCE

Lu­fax has grown into a broader wealth man­age­ment com­pany but con­sumer lend­ing re­mains a core part of op­er­a­tions. Its loan bal­ance was 157 bil­lion yuan ($24.55 bil­lion) at the end of May, showed data from On­line Lend­ing House, also known as wdzj.com, a Chi­nese tracker of the on­line lend­ing mar­ket.

“It makes sense for big play­ers such as Lu­fax to hold off on list­ing un­til there’s more clar­ity on de­tailed reg­u­la­tion. Other­wise, it’s not easy for them to grow new busi­ness, which could im­pact their val­u­a­tion if they plan to go public,” said On­line Lend­ing House head of re­search Yu Baicheng.

In­creased reg­u­la­tory at­ten­tion to con­sumer fi­nance has prompted on­line fi­nan­cial firms to al­ter their fo­cus. Lu­fax peer Ant Fi­nan­cial, val­ued at $150 bil­lion in a re­cent fund­ing round, has shifted em­pha­sis to tech­nol­ogy ser­vices.

Lu­fax raised $1.2 bil­lion in its last fund­ing round in 2016, valu­ing the firm at $18.5 bil­lion.

Some ex­ist­ing share­hold­ers are also look­ing to sell Lu­fax shares - about $30 mil­lion worth at a val­u­a­tion above $30 bil­lion - be­cause of the IPO de­lay, said one of the peo­ple.

Ex­ist­ing in­vestors in­clude Black­pine Pri­vate Eq­uity Part­ners Fund LP, CDH In­vest­ments and Guo­tai Ju­nan Se­cu­ri­ties Co Ltd, ac­cord­ing to data provider Crunch­base.

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