Lufax IPO: The China play #2 in the US

Since I mentioned Ant Financial a week ago, I thought I would take a look at another company in the FinTech space from China that is going public in the US – Lufax. They are looking to raise over $2 Billion with an expected valuation of over $50B. It was last valued at $38B a year ago.

Lufax

Lufax Holding is one of the largest fintech companies in China in terms of AUM. It mainly provides consumer finance and wealth management for individuals, and financial solutions for institutions and governments. Its fully-owned subsidiary, Lufax platform, is one of the largest online wealth management platforms in China.

It is looking to raise over $2.4 Billion and should list before Nov 2020.

Lufax Holding, now mainly comprises 4 business
segments, Lufax platform, Ping An Pu Hui (Pu Hui), and the 2 financial asset exchanges, Qianhai (QEX) and Chongqing Financial Assets Exchange (CQFAX).

In their S1 filing there are a few interesting elements worth noticing.

Market

China has the second largest financial system globally, both by retail credit lending volume in 2019 and by the total amount of investable assets as of December 31, 2019. The estimated demand for small business financing in China was RMB89.7 trillion (US$12.7 trillion) in 2019, of which RMB46.6 trillion (US$6.6 trillion) was unmet.

The current outstanding balance of consumer loans in China is estimated to be RMB12.7 trillion (US$1.8 trillion) as of December 31, 2019. As of the same date, China’s personal investable assets reached RMB192 trillion (US$27 trillion), making it the second largest personal wealth management market globally, and only RMB49 trillion (US$7 trillion) or 26% has been placed in wealth management products.

Financials

Lufax Financials

They did about $6.7 Billion in revenue and $1.8B in profit for 2019, growing at -5% (Covid related) in Q2 2020.

Lufax platform is the largest P2P platform in terms of both outstanding balance and transaction volume of P2P loans in China.

Lufax platform had a total of 32.36m registered users, up 27% YoY while the number of active investor users rose by 17% YoY to 7.69m.

Pu Hui focuses on individual consumer financing and SME financing. It has 3 major businesses: Ping An Zhi Tong Loan, Ping An Guarantee, and the P2P business, which was injected into Pu Hui from Lufax platform in 1H15.


Pu Hui granted new loans of CNY257bn, up 130% YoY. The ending balance of loans under management at end-September 2017 rose
by 141% YoY or 20% QoQ to CNY269bn. Pu Hui is now pushing ahead
with an offline store innovation and online approval system upgrade to
better underpin its outlet expansion in lower-tier cities, and optimize cost efficiency and user experience.

QEX and CQFAX mainly provide institutional financial asset trading
services. QEX focuses more on cross-border business, while CQFAX
focuses more on local government financing business and asset-fund
matching among institutions.