© Reuters. FILE PHOTO: An indication of Ant Group was seen during the World Internet Conference in Wuzhen
By Kane Wu
HONG KONG (Reuters) – China has adopted an extensive restructuring plan for Jack Ma’s Ant Group, a fintech conglomerate whose record $ 37 billion IPO was deflected by regulators in November, that would see the conglomerate become a holding company in finance among other things.
Ant, valued at around $ 315 billion at the IPO price, is also exploring options for Ma’s founder to divest and give up control, as meetings with regulators suggest the move could be. Help draw a boundary under Beijing’s scrutiny of its business, Reuters reported exclusively on Saturday.
Here’s a look at what the company needs to do near to the medium term as a result of the reform:
HOW MUCH ADDITIONAL CAPITAL DOES ANT NEED?
The new regulation requires fintech platforms to own 30% of the total loans they co-lend to banks.
Brokerage firm Jefferies (NYSE 🙂 estimated in a report last week that Ant would need 13.4-20.1 billion yuan ($ 2 – $ 3 billion) of capital to meet the minimum capital adequacy ratio. for consumer finance companies. One-third to half of Ant’s 1.7 trillion yuan in consumer lending is under the co-lender model, Jefferies estimates.
HOW DOES ANT INCREASE CAPITAL?
Brokerage firm Macquarie said it would be difficult for Ant to add more capital to a consumer finance company, which only owns 50%.
In addition, Ant will have to persuade other shareholders to provide more capital to maintain equity, a Hong Kong analyst with a US asset manager registered Ant’s IPO temporarily. stop said.
If that’s not possible, any potential stake change would require negotiations over the company’s valuation that Ant may not want to achieve, the analyst added.
However, One Ant’s investor told Reuters that the likelihood of a capital shortfall would be within Ant’s capabilities and that there would be no need to raise more money from outside investors.
Ant declined to comment.
The analyst and investor spoke on condition of anonymity as they were not authorized to speak to the media.
HOW WILL THE VALUES OF ANT CHANGE AFTER CONSTRUCTION?
It is too early for analysts to come up with a new valuation estimate based on Ant’s overhaul plans as more details are needed.
Some investors told Reuters they were optimistic that Ant would not be as cheap as a Chinese bank, in terms of its business scope and the technological power and data it owns in the economy. second largest in the world.
Major lenders in China’s major banks stock indexes traded at 5-12 times their futures and 0.4-1.7 times their book value, data of Eikon showed. Ant would be worth $ 33 billion if valued at book value at one point in time based on net assets reported last year, calculated by Reuters Breakingviews.
Several global investors valued Ant more than $ 200 billion based on its 2020 performance, Reuters reported.
WHAT HAPPENS TO ANT’S PAYMENT BUSINESS?
It is not clear how Ant will break up from the payments business from Jiebei and Huabei credit products.
Jiebei and Huabei are now embedded in Alipay and rely on the mobile payment app for user traffic.
The unlinking would reduce users of credit products and potentially affect Ant’s loan quality if data access to Alipay, said the Hong Kong-based analyst. that will be restricted or affected.
WHAT WILL ELSE CHANGE AS PART OF THE RESTORE?
Ant said it will set up a personal credit reporting company and apply for a personal credit reporting license.
It was a shareholder of Baihang Credit, one of only two credit institutions licensed by the central bank.
Macquarie analysts believe that the People’s Bank of China may not license Ant for its own credit company, while Jefferies said Ant may have to partner with a state-owned company to become create this agency.