China’s Lufax aims to raise up to $2bn in fresh funding, valuing one of the country’s largest online wealth management platforms at $40bn, 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 advisers to raise equity of at least $1bn, 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 $5bn 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.
Lufax has grown into a broader wealth management company but consumer lending remains a core part of operations. Its loan balance was 157bn yuan ($24.55bn) 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 $150bn in a recent funding round, has shifted emphasis to technology services.
Lufax raised $1.2bn in its last funding round in 2016, valuing the firm at $18.5bn.
Some existing shareholders are also looking to sell Lufax shares – about $30mn worth at a valuation above $30bn – 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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