Ant receives approval to expand its consumer finance business

Regulatory scrutiny forced Hangzhou-based Ant Group to abruptly suspend its massive 2020 IPO plans.

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BEIJING — Ant Group’s consumer finance unit has received approval to more than double its registered capital, a sign of progress in addressing regulators̵[ads1]7; concerns.

Since the abrupt suspension of its massive IPO in late 2020, Ant has been working with Chinese regulators to restructure the business. Alibaba owns 33% of Ant, which operates one of China’s two dominant mobile payment apps.

Alibaba’s Hong Kong-traded shares traded 8% higher on Wednesday. Shares listed in New York closed 4.4% higher overnight.

Ant launched its consumer finance company in 2021 as part of the restructuring.

On Friday, the China Banking and Insurance Regulatory Commission said it approved Ant’s request to increase the amount of registered capital for the consumer unit, to 18.5 billion yuan from 8 billion yuan.

Ant will retain a 50% stake in the consumer finance company, according to the announcement. New investors in the other half of the company include an entity backed by the Hangzhou government and Sunny optical technology.

“This is a positive start to the steps Ant Financial has to go through [with] its restructuring process under the supervision of the CBIRC and the PBOC,” said Winston Ma, an adjunct professor of law at New York University.

Ant receives approval to expand its consumer finance business

It remains unclear what the timeline is, if any, for a revival of IPO plans. Ant has not yet received a financial holding company license from the People’s Bank of China. The company did not immediately respond to a CNBC request for comment.

The consumer unit houses Ant’s credit businesses Huabei and Jiebei. So-called credit technology had contributed 28.59 billion yuan, or 39.4%, to Ant’s revenue in the first six months of 2020, according to a prospectus.

China’s banking regulator said the company had six months to complete the changes before the approval of the capital increase was invalidated.

Chinese media previously reported on the approval, the terms of which were previously made public.

— CNBC’s Arjun Kharpal contributed to this report.

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