Rumours of an IPO in the Chinese P2P market have blown in from the East.
According to the South Morning China Post, Ping An Insurance is mulling the possibility of floating its internet finance company Lufax – one of the world's largest peer-to-peer lending platforms. In April, Lufax completed an immense $485m equity funding round, that saw the business valued at around $10bn. BlackPine Private Equity Partners, CDH Investments and China International Capital Corp.’s private equity division were said to have accounted for the bulk of the funding. The round left Ping An, mainland China’s second largest insurance firm and Lufax’s early backer, with a minority stake in the company.
But the insurance firm appears to have retained sway enough to push Lufax towards an IPO. Its Chief Financial Officer Jason Yao said last week that a plan to boosts the platform’s value was under active consideration. That plan appears to involve a move to bring Puhui (an offline personal loans company, which appears to be another unit of the Ping An operation) under the ownership of Lufax Holdings. The latter will reportedly own 100% of the equity of Puhui, according to a document filed with the Hong Kong stock exchange by Ping An on Thursday of last week.
Mr. Yao confirmed that the intention is for Lufax to run both online and offline lending businesses in the future. The plans is to build “an O2O (online-to-offline) ecosystem”.
Valuation metrics may be a problem area for Lufax when sizing up the IPO. There is no real precedent, with no publicly listed platforms currently operating in China, and only a few (such as Lending club and OnDeck) to compare against globally. Dayton Wang, an insurance analyst at Guotai Junan International, told the South Morning China Post:
"We still lack specific data to analyse the earning ability of this segment. It is hard to evaluate the revenue or profit brought in by Lufax or Puhui, even though we know the user number is swelling.”
To say that the user number is swelling is to put it mildly. Lufax supposedly doubled its registered users to a staggering 10 million in the first half of 2015. Transactional volumes within the Chinese P2P space are extremely difficult to gauge, and equally hard to trust. But the numbers within the world’s largest internet finance market are undoubtedly huge.
Renrendai Co-Founder Yang Yifu recently announced his desire to hold off a public offering until the sector enjoyed a tighter regulatory framework. Mr. Yifu believes that the requirement for transparency that an IPO inevitably brings to a company would stand as a significant competitive disadvantage – at least in the short-term – given the opacity of the market as a whole. Ping An appears not to share the Renrendai boss’ reservations, perhaps thanks to the recent release of a new set of regulatory propositions from The People’s Bank of China.
In summary, we may soon see the Chinese P2P sector's first IPO, and it might herald the start of a push for greater transparency within this most clouded and sprawling of markets.