Jack Ma’s Ant Group is moving forward with plans to raise capital for its lending arm after a major state-owned asset manager pulled out of an earlier fundraising deal for the unit.
The fundraise is part of a government-led restructuring effort for Ma’s fintech company, which has been working to revamp its business since Chinese regulators called off its blockbuster $37bn initial public offering more than two years ago.
The deal will bring in Rmb10.5bn for Ant’s consumer finance unit, about half of the Rmb22bn that the group had originally hoped to raise last year, according to a filing from one of the investors, Yuwell Group.
A vehicle controlled by the government of Hangzhou, where Ant is based, is set to step into the void left by China Cinda Asset Management’s surprise exit in January citing “prudent commercial consideration”. Hangzhou Jintou Digital Technology will contribute Rmb1.9bn, gaining a 10 per cent stake in the business.
Ant has become a high-profile target in Beijing’s regulatory crackdown on some of the country’s fastest-growing technology groups.
Since Ma criticised Chinese regulators and state banks two years ago, the billionaire has largely disappeared from public view while both companies he founded, Ant and ecommerce group Alibaba, have faced a thicket of new regulatory obstacles.
China’s financial regulators have focused on shrinking Ant’s business as part of a grinding “rectification” campaign for the group, which was China’s largest issuer of consumer credit.
Ant’s credit operations, which funnel loans through its Alipay app, was hived off into a separate unit last year. Ma’s group retained a 50 per cent stake in the newly established company, Chongqing Ant Consumer Finance, and outside investors including state-owned groups were brought in to buy the remainder of the shares.
The company’s enlarged capital base will allow Ant to support a bigger portion of its online lending activities within new government rules created to rein in financial risk.
The lending arm had been Ant’s most profitable business line, and accounted for 39 per cent of its revenue in the first half of 2020. Chongqing Ant’s business reported Rmb1.1bn in net income against Rmb3.2bn in revenue in the first nine months of this year, according to the Yuwell filing.
While the capital raise marks progress for Ant’s lending unit, a person close to the company said the group’s regulatory overhaul remains “far from over”. Ant and Chinese authorities remain at odds on usage of its vast trove of user data.
Qiantang Credit Scoring Co, which is meant to take over Ant’s user data for commercial use, has yet to receive a business licence a year after it applied for one with the People’s Bank of China. People close to Qiantang said Ant, which has a 35 per cent stake in Qiantang, is competing with the central bank for control over the credit scoring unit.
“The central bank thinks it’s not safe to put so much data under the control of a private group,” said the person. “It is best to have a state-backed entity to take care of the resource.”
Ant did not immediately respond to requests for comment.