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Ant Group
Tech

Ant Group expands capital base of consumer finance unit to meet regulatory demands, although scale is down from earlier plan

  • The capital expansion is down substantially from an original 22 billion yuan planned at the end of 2021
  • If Ant had not been able to expand the capital base of the unit, it would have needed to scale back existing businesses to comply with regulations

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Ant Group’s booth for this year’s World Internet Conference. Photo: SCMP/ Tracy Qu
Coco Fengin Beijing

Ant Group, which is undergoing a restructuring to comply with new regulations after its planned mega IPO in Hong Kong and Shanghai was called off two years ago, has completed a key piece of the puzzle with an expansion of the capital base at its consumer credit unit.

Chongqing Ant Consumer Finance Co, a new subsidiary set up in June 2021 to bring the group’s sprawling and lucrative consumer finance business within regulatory limits, will increase its capital to 18.5 billion yuan (US$2.63 billion) from a current 8 billion yuan. This was seen as a necessary step for Ant to be able to maintain its consumer credit business under the two brands of Huabei and Jiebei.

The capital expansion is down substantially from an original 22 billion yuan planned at the end of 2021, which failed to materialise after China Cinda Asset Management, a state-owned firm created in 1999 to manage bad assets from China Construction Bank, walked away from the plan.

The suspension of Ant’s IPO, which was expected to give the fintech giant a record valuation of US$300 billion, in late 2020 was a watershed moment in the relationship between Beijing and domestic Big Tech firms. China’s central bank and financial regulator imposed fresh regulations to clip the wings of Ant Group, an affiliate of Alibaba Group Holding, demanding that the fintech giant follow the same rules as a conventional bank, such as having an adequate capital base and leverage ratio.

Alibaba owns the South China Morning Post.

If Ant had not been able to expand the capital base of the unit, it would have needed to scale back existing businesses to comply with the new regulatory requirements.

Ant will contribute half, or 5.25 billion yuan, of the funds to remain the largest shareholder with a 50 per cent stake. Jiangsu Yuyue Medical Equipment and Supply Co, an existing shareholder, will pay 524 million yuan to maintain its 4.99 per cent equity stake, the company said in a stock exchange filing on Monday evening.

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