Feb. 5 (NBD) -- While releasing the financial report for the third quarter in 2018, Alibaba Group Holding declared that it agreed to buy a 33 percent stake in its affiliate Ant Financial, which raised a great clamor around an Ant Financial initial public offering (IPO).

Alibaba Chief Financial Officer (CFO) Wu Wei reiterated at the teleconference last Thursday with analysts that there hadn't yet been any discussion about the possible IPO for Ant Financial.

An anonymous analyst with a financial research institute said to NBD in an interview that this ownership structure change in Ant Financial is highly likely aimed to restore the benefit allocation, paving the way for the public listing of the firm.  

The tie between Alibaba and its payment affiliate can be deepened through the stock acquisition and the adjustment in Ant Financial's shareholding structure can also facilitate a better strategic arrangement of Ant Financial, added the analyst.

Photo/VCG 

Ant Financial reports a profit in all its three major businesses

Ant Financial, officially founded in October 2014, originated from Alipay, the world's largest mobile and online payments platform. In July 2015, Ant Financial completed its A-round financing and in April 2016, it further obtained 4.5 billion U.S. dollars of B-round financing, pushing its value to a whopping 60 billion U.S. dollars.  

Cai Chongxin, vice chairman of Alibaba commented at the teleconference that Ant Financial was highly profitable and it announced earnings in all three major businesses including payments, trust products and wealth management.

According to the updated financial reports of Ant Financial, the company paid, in the name of copyright royalty and charges for technology services, 2.086 billion yuan (331 million U.S. dollars) to Alibaba for the fiscal year of 2017, up 85.9 percent year on year.

Cai explained that Alibaba's move to buy stakes in Ant Financial is to achieve strategic targets of Alibaba, adding that under the current new retail model that Alibaba advocates, the mobile platform is the key to bridging the cooperation between the firm and the off-line dealers. Customers can use mobile payments in the brick-and-mortar stores, which will create plenty of cooperative opportunities in the future, Cai noted.

Zhang Yong, CEO of Alibaba echoed Cai's perspective, saying that thanks to the active expansion of Ant Financial, Alibaba now has access to a large amount of new users, and through the mobile payments platform, Alibaba and Ant Financial will make concerted efforts to transform users to consumers.

Alibaba's stake in Ant Financial likely paves the way for the latter to go public

Jack Ma, founder and executive chairman of Alibaba said at the World Economic Forum held in Davos that Ant Financial wouldn't consider being listed on the Hong Kong Stock Exchange in 2018.

However, an insider at Ant Financial told NBD that although there wasn't a detailed timetable, yet an Ant Financial IPO was foreseeable.

After the stock acquisition, Ant Financial will terminate the current profit-sharing arrangement under which Ant Financial pays royalty and technology service fees in an amount equal to 37.5 percent of its pre-tax profits to Alibaba.

An industry insider said to NBD that the move will futher firm up the equity structure of Ant Financial and reduce uncertainties. Besides, to stop profit-sharing will polish the company's financial results to meet listing requirements, the industry insider added.

With regard to where to get listed, the above-mentioned anonymous analyst pointed out that it depends whether Ant Financial can get approvals from the authorities in Mainland China, explaining that currently, the listing of online financial institutions is prohibited on the Mainland.

But the person believed that the mainland is the first choice for Ant Financial to go public if the company can be greenlighted as a particular case.

Early this year, in response to remarks by Hong Kong Chief Executive Carrie Lam about how she hoped Alibaba would consider returning to Hong Kong to list, Jack Ma commented that Alibaba will seriously consider the Hong Kong market and will continue to participate in building the financial market in Hong Kong.

Email: gaohan@nbd.com.cn