Ant Group, the parent company of China’s largest digital payment platform, Alipay, today published a set of documents related to its upcoming IPO.

Ant Group has applied to the Hong Kong Stock Exchange for the grant of listing of, and permission to deal in, the H Shares to be issued pursuant to the H Share Issuance (including any additional H Shares which may be issued pursuant to the exercise of the H Share Over-allotment Option) and any Domestic Shares registered as H Shares upon the H Share IPO.

The H Share IPO comprises:

• the Hong Kong Public Offering of initially 41,768,000 H Shares (subject to adjustment) representing 2.5% of the total number of Offer Shares initially available under the H Share IPO, and
• the International Placing of initially 1,628,938,000 H Shares (subject to adjustment and the H Share Over-allotment Option) representing 97.5% of the total number of Offer Shares initially available under the H Share IPO.

A total of 1,670,706,000 Offer Shares will initially be made available under the H Share IPO, representing approximately 5.5% of Ant Group’s total outstanding shares following the completion of the H Share Issuance and the A Share IPO, assuming that the Over-allotment Options are not exercised.

Up to 250,605,900 additional Offer Shares representing not more than 15% of the number of Offer Shares initially being offered under the H Share IPO may be issued upon exercise of the H Share Over-allotment Option.

Ant Group estimates that the net proceeds of the H Share IPO which it will receive, assuming an Offer Price of HK$80.00 per H Share will be approximately HK$131,991 million. The Group intends to use the net proceeds of the H Share IPO for the following purposes:

• 10% – further pursue of its vision to digitalize the service industry, increase cooperation with partners and facilitate their digital transformation;
• 40% – enhance its innovation and research and development capabilities through enhancing its research team, investing in product and service innovation and leading technologies;
• 40% – expand its cross-border payment and merchant services initiatives through enhancing its cross-border payments capabilities, investing in technology and service enhancement, and developing more digital services for consumers, merchants and partners beyond China;
• 10% – working capital and general corporate purposes.

Concurrently with the H Share IPO, Ant Group undertaking a public offering of its A Shares in the PRC. The A Share IPO and H Share IPO are two separate and independent offerings, and neither offering is conditional upon the other.

The A Share IPO comprises an offering of initially 1,670,706,000 A Shares for subscription, representing approximately 5.5% of Ant Group’s total outstanding Shares following the completion of the H Share Issuance and the A Share IPO, assuming that the Over-allotment Options are not exercised.

The A Shares and H Shares will rank pari passu with each other in all material respects.

Let’s note that Ant Group’s revenues increased by 43% to RMB118,191 million in the nine months ended September 30, 2020, from RMB82,909 million in the same period in 2019, primarily due to growth in revenues from the digital finance technology platform and, to a lesser extent, digital payment and merchant services.

Ant Group’s gross profit increased by 74% to RMB69,549 million in the nine months ended September 30, 2020, from RMB39,907 million in the same period in 2019. The gross profit margin increased to 58.8% in the nine months ended September 30, 2020, from 48.1% in the corresponding period in 2019 as the revenues outgrew transaction fees. This is primarily due to stronger growth in revenues from the Group’s digital finance technology platform.

Furthermore, as the Group decreased spending on promotion and advertising due to the impact of the COVID-19 pandemic and ceased the Royalty and Service Payment to Alibaba in September 2019, its operating expenses (comprising selling and marketing expenses, general and administrative expenses and research and development expenses) in the nine months ended September 30, 2020 decreased notably as a percentage of its total revenues as compared with the same period in 2019.