Shanghai-based Lufax raises $1.2b ahead of planned IPO
Fundraising helps set valuation benchmark, pay for development
Published: Jan 18, 2016 08:28 PM Updated: Jan 19, 2016 06:38 AM

A signboard of is seen at the booth of Shanghai Lujiazui International Financial Asset Exchange Co during the 15th International Internet+ Finance Expo held in Beijing on December 11, 2015. Photo: CFP

Peer-to-peer lender and financial-asset exchange Shanghai Lujiazui International Financial Asset Exchange Co (Lufax) said on Monday that it had raised $1.22 billion ahead of its planned IPO.

Investors in the deal include Bank of China Group Investment Ltd and Guotai Junan Securities (Hong Kong) Ltd, according to a press release Lufax sent to the Global Times on Monday.

Ping An Insurance will remain the largest shareholder after the deal, Lufax Chairman Ji Kuisheng told a press conference in Shanghai on Monday. Lufax is based in Shanghai.

Ji said that Lufax is expected to get listed as early as the second half of 2016, but he gave no further details.

JD Finance, an online division of China's second-largest e-commerce player Inc, announced a 6.65 billion yuan ($1.01 billion) round of financing on Saturday. Another Internet finance giant in China, Ant Financial Services, a division of Alibaba Group Holding, is also back in the market to seek Series B funding that media reports said will reach $1.5 billion.

"Internet finance companies can set a valuation benchmark for their eventual IPOs via fundraising rounds," Li Chao, an industry analyst with Beijing-based market consultancy iResearch, told the Global Times on Monday.

Following the latest deal, Lufax said that it was valued at $18.5 billion, up from $10 billion previously, according to data from US-based venture capital database CB Insights.

Neither Ant Financial nor JD would comment on IPO-related news.

Li noted that the Chinese mainland may be the first choice for their private investors, most of which are based in the Chinese mainland.

"In addition, Chinese bourses will do all they can to attract high-quality Internet finance companies, whose listings will boost the overall stock market," he said.

Zhang Yi, CEO of Guangzhou-based market research firm iiMedia Research, attributed the fund-raisings to the necessity for business development and expansion.

"Internet finance in China is a new emerging field, which lacks mature business models for companies' sustainable development," Zhang told the Global Times on Monday.

Lufax said it had more than 18 million registered users as of December 2015. According to Ping An Insurance's latest quarterly report issued in late October, Lufax's transactions stood at 926.4 billion yuan in the first three quarters of 2015, up more than 900 percent year-on-year.

However, Lufax is still losing money. It's estimated that it lost $415 million in 2015, with the shortfall in 2016 forecast to be $68 million, domestic news portal reported on Monday.

JD Finance recorded a net loss of 677 million yuan in the first three quarters of 2015, according to the report.

The investment will be used to forge Lufax into a "global leading online wealth management platform," Ji was quoted as saying in the press release Lufax sent to the Global Times.

Lufax, which specializes in peer-driven lending, has been diversifying into other Internet finance services such as online money market funds and crowdfunding in the past two years. It raised 3 billion yuan from a group of investors to support its development in March 2015.

"Lufax has advantages over Ant Financial Services and Inc's Internet finance arm in terms of lending money to companies with the aid of Ping An Insurance, but it still lags far behind the other two in terms of consumer finance," Zhang said.

China's Internet finance market, which is perceived to be promising, has been attracting an increasing number of companies. Wang Jianlin, chairman of real estate giant Dalian Wanda Group, was quoted as saying in a post on the company's website on Saturday that the company will offer Internet finance services such as online credit in 2016.

On Monday, Wang also said that Wanda plans an IPO for its Internet finance business, according to a Reuters report.

Internet finance companies which can secure a cooperation with traditional financial institutions would likely outlive the competition, said Li.
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