Tiandihui seeks fresh funds to expand to supply chain finance
The online road transportation operator says the transaction value for 2017 is likely to hit 120 billion yuan, doubling last year’s number
Shanghai Tiandihui Supply Chain Management, the mainland’s largest online road transportation operator, is looking to raise fresh capital to expand into supply chain finance, becoming the latest logistics player to tap into the lucrative business.
Xu Shuibo, founder and chief executive of Tiandihui, told the South China Morning Post that the third round of financing would help the company create a complete chain of business in the logistics industry. He added that they would give priority in risk management when diversifying into financial services.
“The proceeds from the fundraising will be used to boost our capital base to support the finance business,” he said. “China’s fragmented logistics sector has to be integrated and developed to buoy the national economy.”
Xu would not disclose the size of funds Tiandihui aims to net.
Shanghai-based Tiandihui has reported soaring growth for its online platform which matches trucks with cargo, and connects more than 50 cities across the mainland, since its establishment four years ago.
In 2016, the platform handled more than 64 billion yuan (US$950 million) worth of transactions, more than four times of the amount for the previous year.
In the first half of 2017, transaction value had topped 50 billion yuan.
Xu forecast that the total transaction value for the whole of 2017 would hit 120 billion yuan, nearly doubling the 2016 figure.
Supply chain finance, which the company plans to expand into, refers to credit given to the small- and medium-sized enterprises that act as suppliers to a large blue-chip buyer.
Tiandihui will offer credit to businesses including truck owners, cargo owners and related partners that use its platform.
“It is not a business that enables you to make easy money,” Xu said. “We have to assess risks properly to make sure the profits can be achieved.”
Tiandihui is following in the steps of China’s largest express delivery firms such as SF Express to expand into financing services.
China’s logistics businesses reported a total output of 11.1 trillion yuan in 2016, representing about 15 per cent of the country’s gross domestic product, according to Zhou Hanmin, a vice-chairman of Shanghai’s Chinese People’s Political Consultative Conference and a leading economist in the city.
He contended that the staggering size of the logistics industry was not necessarily beneficial to the overall economic growth, as manufacturing businesses were footing a huge bill for logistics costs, and squeezing their profitability.
Beijing is looking to slash 1 trillion yuan in national logistics costs by 2020 to improve the efficiency of the transportation and delivery services.
Road transport makes up about 60 per cent of the mainland’s logistics industry, in which more than 90 per cent of the 8 million players are small-scale and individually owned.
Tiandihui also operates ports on the roads to enhance cost-efficiency in arranging goods deliveries by making use of its centralised dispatch system. The ports functions as a hub in which goods are rearranged for the next phase of transportation.
Xu added that Tiandihui was still mulling when and where to list its shares.