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(Bloomberg) -- India’s mass transit systems, unreliable even before the coronavirus pandemic, were shut off completely when the country locked down. As a result, Indians rushed to find alternative transportation, and that often meant used cars.A major beneficiary was Cars24 Services Pvt., an online marketplace for used cars based in Gurgaon, India. The company’s valuation jumped to more than $1 billion after a new round of funding, Cars24 plans to announce Tuesday. DST Global, an investment firm overseen by Russia-born billionaire Yuri Milner, led the $200 million deal.The investment doubles the total funds raised by Cars24 since the business was established five years ago. The chief executive officer and co-founder, Vikram Chopra, was an investment analyst early in his career at Sequoia Capital, one of the world’s most prominent venture capital firms and now a Cars24 investor. Chopra started Cars24 after having a hard time selling his Hyundai Accent before a temporary move to the U.S., he said. Daunted by the situation, he ended up giving his car to a friend instead, he said.By the middle of this year, Cars24 saw sales rise 20% from pre-lockdown levels. That followed some weeks in the spring when the site generated no revenue whatsoever. At first, Chopra thought the numbers reflected pent-up demand that would be short-lived but said sustained high levels of traffic to the site suggest otherwise.Cars24, which takes a cut of each transaction, is on track to generate estimated gross annual revenue of $600 million, Chopra said. “Our awareness among consumers has shot up dramatically,” he said. One area where he anticipates strong growth is in financing, which he said seven in 10 customers ask for but has traditionally been hard to arrange for secondhand cars.India’s pre-owned vehicle market is fragmented and dominated by mom-and-pop operations. Online retailers like Cars24, Droom and OLX, along with the automakers themselves, offer a more consistent buying experience, simplified paperwork and access to lenders. India lacks a system to establish fair values for used cars like Kelley Blue Book, making the process more complicated and opaque.As the pandemic drags on, trains and buses in Bangalore, Delhi and Mumbai have resumed service, but fear of contracting the virus is keeping many commuters away. Coronavirus cases in India surpassed 9 million; infections are soaring; and multiple cities are contemplating further lockdowns.For Cars24, the new investor brings, as its name implies, a global expertise. DST Global is based in Hong Kong and has backed a varied list of companies over the years, including Facebook Inc. and WhatsApp in the U.S. and Alibaba Group Holding Ltd. in China.In India, DST invested in the online shopping company Flipkart, which sold an 80% stake to Walmart Inc. two years ago in a transaction that valued the startup at about $20 billion, and built up the firm’s awareness of the challenges around online marketplaces in India. This year, DST invested in the country’s prominent education-tech startup, Byju’s. What made Cars24 stand out was its ability to handle so many steps, including remote inspections of vehicles, said Rahul Mehta, a Dubai-based managing partner at DST. “You have to be deep into operations,” he said. “These guys have done well.”(Updates with financing details in the fifth paragraph. A previous version corrected the nature of DST’s role in the deal.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Alibaba (BABA) Reversal Means Big Money For Savvy Investors
(Bloomberg) -- The headwinds that toppled Ant Group Co.’s initial public offering now threaten a $22 billion dream of China’s Ping An Insurance (Group) Co. -- to pivot from a finance group to a tech giant and be valued like one.While Ping An’s Lufax Holding Ltd., which offers wealth management and retail lending services, was able to complete its U.S. IPO days before new Chinese rules torpedoed Ant’s $35 billion sale, the stock has given up early gains and is now a target for short sellers. Renewed threats by U.S. regulators to delist Chinese stocks also threaten Ping An’s plans to take more of its in-house startups public.Ant’s IPO suspension “fundamentally changed near-term investment appetite” for Chinese fintech stocks, with Lufax as “the community’s No. 1 consensus short,” according to a Nov. 5 report from Procensus, which polled 84 global investors managing $15.3 trillion. Short interest represented about 34% of Lufax shares outstanding as of Nov. 17, up from just 5% when the Ant deal was pulled, according to data compiled by IHS Markit. Ping An owns about 39% of Lufax after the IPO.China’s tightening grip on fintech firms and an antitrust crackdown complicate Ping An’s bid to lift its valuation closer to those garnered by tech giants like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. The Shenzhen-based finance firm, which gets three-quarters of its revenue from insurance, trades at about 10 times 2019 earnings; Alibaba’s ratio is six times higher.Ping An has pledged to plow more than $22 billion into research from big data to blockchain to make it more “tech” than “fin,” while carving out some of its units through public listings to maximize value.Ten StartupsThe finance group has developed at least 10 startups in recent years after using technology to improve its traditional insurance and banking services. The units, including publicly traded health-care portal Ping An Healthcare & Technology Co. and fintech provider OneConnect Financial Technology Co., are aligned in five groups targeting finance, health, real estate, autos and urban life.China’s move to place lending limits and boost capital requirements on fintech firms presents headwinds for the tech units, which also face threats in the U.S. The Securities and Exchange Commission intends to propose a regulation this year that would lead to the delisting of companies for not complying with U.S. auditing rules, people familiar with the matter have said.Lufax plunged 23% on the Bloomberg News report Tuesday, paring gains to 8% since its IPO last month. OneConnect fell 3.1%, though it has still doubled this year. Ping An Healthcare was little changed last week in Hong Kong and has gained 78% in 2020.The rapidly evolving regulatory framework for fintech firms and other issues like data privacy could delay the IPOs of Ping An’s other units, according to Sanjay Jain，Singapore-based head of financials at Aletheia Capital Ltd.“Big tech will have to contend with growing regulatory oversight in various aspects, it is a global trend and unavoidable,” he said.Other units that Ping An intends to take public include Ping An Smart City and Ping An HealthKonnect, which provides management tools for hospitals and other health-care businesses.“Ping An’s pace of spinning off its tech subsidiaries in the past four years has not been as smooth as it originally guided the market, if we look at both the number of IPOs and their valuations,” said Leon Qi, a Hong Kong-based analyst at Daiwa Capital Markets.Investors have yet to fully realize what technology can bring to Ping An, not just the value from IPOs, but synergies with its core business, executives including former Co-CEO Lee Yuan Siong have argued in recent years. Ping An declined to comment for this story.While management has said it’s not in a hurry to launch IPOs for the tech units, a crackdown on peer-to-peer lending held up the listing of Lufax for a few years. What was once the largest P2P lender morphed into a wealth-management platform as the number of firms was cut to three from more than 5,000.“The company might have been ready to list a couple of years ago, but the regulations were still unclear,” Lufax Chief Executive Officer Gregory Dean Gibb said in an interview. Now, “the rules are clear, the requirements are clear.”Gibb spoke just three days before Jack Ma and other senior executives at Ant were summoned by Chinese regulators, derailing the record IPO that sent shockwaves through financial markets. New regulations to root out monopolistic practices shaved almost $290 billion off the market value of Chinese tech giants in two days.Lufax ExposedWhile Lufax may not be impacted by China’s new rules as much as Ant, it remains “quite exposed” to the risks of regulatory caps on its lending rates, said Kevin Kwek, an analyst at Sanford C. Bernstein.The China Banking and Insurance Regulatory Commission is probing a few companies including Ping An for violating regulatory requirements on small business financing costs. Ping An Puhui Financing Guarantee Co., part of Lufax’s platform that makes micro loans, bundled Ping An’s insurance products while lending to clients jointly with Industrial Bank Co. and charged high fees, pushing up their costs, according to a Nov. 21 statement on the regulator’s website.Gibb said Lufax’s offering of larger loans to small businesses by combining its financial and data strength better meet client needs. Its access to Ping An’s distribution network also provides a moat against rival tech giants and banks, he said.The regulatory tightening is unlikely to slow Ping An’s push to innovate and invest in fintech and healthtech, as the company’s roots in the finance sector suggest that regulatory requirements are “in their muscle memory already,” said Bloomberg Intelligence’s Hong Kong-based analyst Steven Lam.“Valuations can be easily affected by external factors, but the key is whether Ping An can identify good businesses with a sustainable future,” he said.(Updates with regulatory probe in 18th paragraph, analyst comment at the end)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.