Ant Group IPO filing shows strong growth, less reliance on payments

Last modified August 27, 2020. Published August 25, 2020.

Chinese fintech , the parent company of the mobile app, has enjoyed solid revenue growth in recent years while its original payments segment has been eclipsed by other financial services, a filing for its upcoming blockbuster initial public offering shows.

The filing, which was submitted on Tuesday to the Stock Exchange of Hong Kong, shows that the fintech’s revenue for the first six months of 2020 grew by 38.04% from the same period a year ago, from CNY 52.54 billion ($7.6 billion) to nearly CNY 72.53 billion ($10.5 billion). Revenue growth on an annual basis has steadily increased in recent years, climbing by 31.08% from 2017 to 2018, and by 40.71% from 2018 to 2019.

Ant Group’s overall profit, meanwhile, soared by 1,058.72% for the first six months of the year, going from about CNY 1.89 billion ($273 million) during the same period last year to around CNY 21.92 billion ($3.2 billion). Annual profit changes have been volatile in recent years even though the three-year trend shows significant growth, the filing shows, falling by 73.72% from 2017 to 2018 before soaring by 738.22% from 2018 to 2019. 

Profit that is attributable to Ant Group itself, which excludes non-controlling interests, was up by 1,460.18% for the first months of this year, going from about CNY 1.36 billion ($197 million) during the same period a year ago to around CNY 21.23 billion ($3 billion). Attributable annual profit was also volatile in recent years, falling by 90.40% from 2017 to 2018 before soaring by 2,442.28% from 2018 to 2019.

The fintech’s growth has come as the share of revenue has shifted away from its digital payment and merchant services segment, which it traces back to the 2004 founding of Alipay. 

In 2017, the segment made up 54.9% of revenue, while its digital finance technology platforms segment contributed 44.3%. By 2019, the mix reversed, with payments contributing just 43% to Ant Group’s top line, while financial technology platforms came in at 56.2%. For the first half of 2020, the gap has widened, with payments’ top-line share dropping to 35.9% versus financial technology platforms’ 63.4%. The share of the smallest segment, known as innovation initiatives and others, has hardly moved over the years, representing less than 1% of revenue during each reporting period.

The financial technology platforms segment, Ant Group said, is made up of three components: CreditTech, which it traces back to the 2014 launch of revolving-credit product Huabei; InvestmentTech, which it traces back to 2013 and includes Yu’ebao, the biggest money market fund worldwide by assets under management; and InsureTech, which it traces back to 2010 with the establishment of shipping return insurance for then-parent company Alibaba’s Taobao unit and expanded with the 2018 launch of Xianghubao for mutual aid. The innovation segment, meanwhile, includes , a blockchain-based remittance service that it rolled out in 2018.

The displacement of the payments segment’s top-line share can be attributed to slower revenue growth compared to financial technology platforms. Records in the filing show that payments’ revenue for the first half of this year was up by 13.12% year over year, while financial technology platforms’ revenue rose by 56.95%. The former segment had annual revenue gains of 23.60% from 2017 to 2018 and 17.01% from 2018 to 2019, while the latter’s gains were more significant, with respective increases of 40.09% and 66.89%.

Revenue for CreditTech increased for the first six months of this year by 59.48% from a year ago, while posting annual growth of 38.51% from 2017 to 2018, and 86.81% from 2018 to 2019. InvestmentTech’s revenue rose by 56.25% for the first six months of this year versus a year ago, and had annual revenue increases of 32.34% from 2017 to 2018 and 22.11% from 2018 to 2019. Meanwhile, InsureTech’s revenue for the first six months of this year was up 47.26% from a year ago, along with soaring annual revenue in recent years, climbing by 86.31% from 2017 to 2018 and by 107.44% from 2018 to 2019.

Ant Group, which is controlled by Alibaba Group co-founder Jack Ma and is 33% owned by the Chinese ecommerce company, shared financial-services growth metrics that have sharply risen along with revenue. CreditTech’s total credit balance was at more than CNY 2.15 trillion ($311 billion) for the first six months of this year, a 6.95% sequential increase from the end of 2019; the credit balance rose annually by 61.67% from 2017 to 2018 and by 92.54% from 2018 to 2019. 

InvestmentTech had enabled assets under management, which includes third-party companies, of almost CNY 4.01 trillion ($580 billion) for the first six months of the year, up 20.63% from the end of 2019. AUM increased annually by 21.64% from 2017 to 2018 and by 25.43% from 2018 to 2019. InsureTech had premiums and enabled contributions of CNY 52 billion ($7.5 billion) for the first six months of this year, up by 36.84% from the end of 2019. The metric grew substantially on an annual basis, rising by 55.56% from 2017 to 2019 and by 171.43% from 2018 to 2019.

Meanwhile, the company reported that its total payment volume for the payments segment stood at CNY 118 trillion ($17 billion) as of June 30, up 6.31% from the end of 2019. Annual TPV increases were 31.88% from 2017 to 2018 and 21.98% from 2018 to 2019. 

Alipay, which was spun out of Alibaba in 2011, is used for accessing both payments and financial technology platforms through its app, Ant Group said. The company also noted that the app has more than 1 billion users. 

The company disclosed that it also has an extensive list of partner organizations for its financial services. As of June 30, they included about 100 banks for CreditTech, about 170 asset managers for InvestmentTech and about 90 insurance institutions for InsureTech. 

Ant Group also submitted IPO paperwork on Tuesday to the Shanghai Stock Exchange’s STAR Market. 

Filings for both exchanges show that it has hired several prominent U.S. and Chinese banks; , JPMorgan Chase, Morgan Stanley and are handling the Hong Kong IPO, while CICC and CSC are working on the Shanghai IPO.

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