JD Finance, a financial services spinout of China-based e-commerce business JD.com, is raising additional capital at a RMB50bn ($7.3bn) valuation, China Money Network reported on Thursday citing an unnamed source.
Investors will be required to supply at least RMB200m in cash in order to take part in the round, though details of its target size have not been revealed.
JD Finance has committed to conducting an initial public offering within five years and in the event that a flotation does not materialise it will repurchase shares at an annualised return of 9.38%.
The news follows JD.com’s decision earlier this month to divest its entire 68.6% stakeholding in JD Finance, which marked a first step towards an initial public offering for the financial services spinout.
The divestment is expected to be completed by mid-2017 and will provide JD.com with a RMB14.3bn windfall. The parent company will also secure the rights to receive 40% of JD Finance’s future pre-tax profit, which may then also be exchanged for a 40% equity stake pending regulatory approval.
JD.com created JD Finance in 2013 to provide financial products such as consumer credit, wealth management and third-party payment services. The platform competes with offerings such as Ant Financial, the financial services affiliate of e-commerce group Alibaba.
Insurance provider China Taiping Insurance co-led a $1bn share subscription for JD Finance in January 2016 with venture capital firm Sequoia Capital and investment firm China Harvest Investments. At the time, JD Finance was valued at approximately $7.1bn.