This website requires JavaScript.
China

Online finance marketplace Lufax plans to raise USD 1.3 billion

Lufax was initially planning to get listed in Hong Kong in April 2018 at a valuation of USD 60 billion, but the company later postponed the IPO and eventually cancelled it.

Dec 5, 2018 by A. Alfaro
Online finance marketplace Lufax plans to raise USD 1.3 billion

Online finance marketplace Lufax aims to raise USD 1.3 billion in its next financing round.

According to sources familiar with the process quoted by Reuters, Lufax (陆金所) will have a market valuation of USD 38 billion after the completion of the financing round. This figure is lower than Lufax’s original target of USD 40 billion.

The source further revealed, many investors from different fields have participated in the round but their names remain secret. On September 2018, Bloomberg informed that some sovereign funds from Middle Eastern countries such as Qatar were considering investing. According to Bloomberg, QIA (Qatar Investment Authority) was planning to invest between USD 500 million and 1 billion, but they declined to pass comment.

Rumors about Lufax’s investment round started even earlier this year, in June. Back then, Reuters reported that Lufax was hoping to raise USD 2 billion and achieve a market valuation of 40 billion.

China-based investment firm Primavera Capital (春华资本) is among the leading investors and there are other important participants such as QIA, Hong Kong-based All-Stars Investment and the Japanese SBI Holdings, a Reuters report said. The list goes on with names such as JP Morgan Chase, Macquarie Group, UBS and Hermitage Capital. However, the process has not finished yet and other investors could still participate. Lufax, Macquairie Group and UBS declined to comment on the issue.

Lufax is fintech company established by Chinese holding conglomerate Ping An (中国平安) in 2011. According to Ping An’s financial report for the first half of 2018, Lufax has 36 million registered users, has assets valued at USD 55 billion and it has granted USD 115 billion in loans in total.

Lufax was initially planning to get listed in Hong Kong in April 2018 at a valuation of USD 60 billion, but the company later postponed the IPO and eventually cancelled it. During the first half of 2018, the Chinese government tightened control over the fast-growing consumer lending sector to curb financial risks, fearing social instability. This tighter control affected most big Chinese fin-tech companies. In August, Alibaba-backed Ant Financial also postponed its IPO.

It is not known when or whether Lufax will restart its IPO process. Sources from within the company quoted by the Chinese portal 36Kr declared that the company is trying first to diversify its activity, moving away from loans, before considering getting listed. Rumors about Lufax’s IPO have been circulating for years, at least since 2014. The company has always officially denied the rumors, but they keep coming up every year.

If the company wants to get listed, it must move away from a sector that is now considered unstable, especially after the collapse of P2P lending in China in summer 2018. In September, rumors about Lufax’s own collapse started circulating after some of its cooperative partners such as ST Dongli started facing financial hardships.

Risk management remains as one of Lufax’s more pressing problems. If the Shanghai-based company wants to preserve a high valuation and receive investors’ approval, it will have to dissociate its name from “high risk loans”.

A. Alfaro

A. Alfaro is a Beijing-based freelance reporter. He focuses on China's politics, culture and society. He can be reached at varofaro@gmail.com. 

Follow A. Alfaro