Ant Boosts Capital to $5.4 Billion One Year After IPO Halted

(Bloomberg) -- Ant Group Co. ramped up its capital base to 35 billion yuan ($5.4 billion), almost a year after Chinese regulators thwarted its record initial public offering and told it to overhaul its sprawling operation.

Billionaire Jack Ma’s fintech giant got approval on Sept. 30 to boost its registered capital from 23.8 billion yuan, according to the official National Enterprise Credit Information Publicity System. 

Ant Group increased the amount based on relevant regulations to better support its future growth, a company spokesperson said in an emailed reply to questions from Bloomberg News. The money comes from its capital reserve and the company hasn’t conducted any fundraising activities or tapped investors, the spokesperson said.

The move marks another major step in Ant’s efforts to overhaul operations and meet stringent regulatory requirements following a crackdown on China’s most powerful technology corporations. Ant has already agreed to turn itself into a holding company that will be regulated more like a bank. Regulators have also proposals that threaten to curb Ant’s dominance in online payments and scale back its expansion into consumer lending and wealth management.

Central bank Governor Yi Gang said last week that China will continue taking steps to curb monopolistic behavior among internet platform companies and strengthen the protection of consumer privacy and data security. It will bolster the regulation of the payments sector and ask all financial services companies to be licensed, Yi said.

Ant’s move to increase registered capital was due to the need to beef up the capital base of new subsidiaries, including its consumer finance unit, according to Bloomberg Intelligence analyst Francis Chan.

Among the rules that hit Ant the most is a 30% funding requirement for online lenders when they jointly issue loans with traditional banks. Ant’s Jiebei and Huabei businesses had facilitated 1.7 trillion yuan in consumer loans to 500 million people as of June last year. The company kept only about 2% on its balance sheet with the rest funded by third parties or packaged as securities and sold on. 

Regulators in June gave Ant approval to fold Jiebei and Huabei into a new consumer finance unit with 8 billion yuan of registered capital. Ant will provide 4 billion yuan, giving it a 50% stake. Yet at 10 times leverage of its registered capital, that means its total amount of joint loans will be capped at 266 billion yuan, analysts have said.

Meanwhile, the central bank has recently asked platform businesses to carve out their personal credit information business, and they must now provide such services to financial companies through licensed agencies. Ant is set to form a credit scoring joint venture with Zhejiang Tourism Investment Group Co., each owning 35% of the company, Reuters reported in September.

While Ant Chairman Eric Jing has promised staff that the company would eventually go public, its valuation has plummeted, making it hard to tap external capital. Fidelity slashed its valuation estimate for Ant to about $78 billion as of June 30, while BlackRock Inc. assigned the company a value of $174 billion and T Rowe Price Group Inc. set it at $189 billion.  

©2021 Bloomberg L.P.

With assistance from Bloomberg