Alibaba announced a major restructuring plan to split its US$257 billion empire into six independent entities last Tuesday, saying it would lead to quicker decision-making and give each unit greater operational independence.

Each company will be allowed to “pursue fundraising from third parties and IPOs when they are ready,” said Daniel Zhang Yong, chairman and chief executive of Alibaba, which also owns the South China Morning Post.

The other five units to be devolved are Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Global Digital Commerce Group and the Digital Media and Entertainment Group.

Cainiao has become the hot favourite to conduct an IPO first, with analysts saying it has played “a critical role” in supporting Alibaba’s e-commerce operations at home and abroad.

“Within the Alibaba ecosystem, Cainiao has provided significant support for [the e-commerce business] of Taobao and Tmall,” said Zhang Yi, CEO and chief analyst at iiMedia Research. “As an open logistics system, it also has significant growth potential [as a stand-alone company].”

Analysts also noted Cainiao’s critical role in overseas markets.

“Alibaba’s future growth will come primarily from new overseas customers, and Cainiao is continuously tapping the overseas market by building logistics hubs, warehouses, distribution centres and other infrastructure,” said Wei Jianhui, a senior analyst at Analysys, a Beijing-based research firm.

“Cainiao’s Hong Kong IPO, if confirmed, will help improve its logistics supply chain ecosystem and … provide better opportunities to develop international markets.”

During the same period, the company reported an adjusted EBITA loss of 12 million yuan (US$2 million), compared to a loss of 92 million yuan in the same quarter of 2021.

Hong Kong recently eased its listing rules for tech start-ups, allowing companies with a valuation of at least HK$10 billion (US$1.3 billion) to sell shares, even if they have not yet generated any sales revenue.

In addition, the minimum valuation for companies with at least HK$250 million in sales in the previous financial year has been lowered from HK$8 billion to HK$6 billion. This means that Cainiao meets the requirements to be listed under Hong Kong’s regulations, which came into effect on March 31.

Despite the gloomy global economic situation and supply chain risks last year, Cainiao expanded its international logistics network, including the construction of five new international sorting centres, bringing the total number to 15.

On Monday Cainiao said it plans to build an air cargo centre at Shenzhen Bao’an International Airport to “support growing cross-border e-commerce parcel volume” between China and Latin America. It also plans to partner with Atlas Air, a major American cargo airline, to launch international cargo routes to transport products from electronics to automobiles.

Wei said that Cloud Intelligence Group, Alibaba’s digital technology and intelligence business founded in 2009, is also likely to go public early as it is “the underlying driving force behind Alibaba’s entire business development”.

When assessing IPO prospects, iiMedia’s Zhang said two factors should be taken into consideration: the financial performance of the unit and the need for capital investment.

“The market will give it [business unit] a better evaluation if it has a good record of revenue and profits, and if it requires a large amount of capital investment, meaning that the parent company wants it to attract public funds to drive business growth instead of investing itself,” he said.

Zhang added no matter which Alibaba unit goes public first, “investors will want to see success before considering subsequent investments, so IPOs for the initial batch of companies will be conducted cautiously”.

Alibaba is not alone in seeking to unlock value and entrepreneurship. E-commerce rival JD.com said that it plans to spin off its subsidiaries JD Property and JD Industrials and list them separately on the Hong Kong market, just days after Alibaba’s announcement.

iiMedia’s Zhang said the developments reflect the fact that Big Tech companies in China “have grown to a certain level and face development bottlenecks”, hence it is an “inevitable choice”.

Wei from Analysys agrees, seeing spin-off plans as “beneficial for improving regulation at the national level”, while also enabling companies to “shed the burden of the group” and better serve customers.

“As the Hong Kong capital market becomes favourable for technology companies, it will provide good opportunities for them to raise more funds for long-term development,” said Wei.