JD Logistics to Raise $3.4 Billion in IPO

Issue 71

After operating in the red for 14 years, JD.com’s logistics subsidiary is getting ready for an initial public offering in Hong Kong. Dubbed the Amazon Logistics of China, JD Logistics will price its share between HK$39.36 and HK$43.36 apiece, which could see the firm raise up to about HK$26.4 billion or $3.4 billion.

JD.com, Alibaba’s e-commerce rival in China, began building its own logistics and transportation network from the ground up in 2007 and spun out the unit in 2017, following a pattern where major segments of the tech giant became independent units, such as JD.com’s health and fintech units. JD.com is currently the largest shareholder of JD Logistics with an aggregate stake of 79%.

Unlike Alibaba’s asset-light approach, which relies on a network of third-party partners to fulfill orders, JD takes a heavy-asset approach like Amazon, building up warehouse centers and keeping its own army of courier staff. As of 2020, JD Logistics had over 246,800 employees working in delivery, warehouse operations among other customer services dropping from its previous year headcount.

Through becoming independent from JD.com, JD logistics was able to expand their market share helping retailers like Skechers optimize their logistics operations. As a result, the share of its revenue from external customers rose from 29.9% in 2018 to 38.4% in 2019, and to 43.4% in the nine months ended September 2020.

The firm posted a net loss of 2.8 billion yuan, 2.2 billion yuan and 11.7 million yuan in 2018, 2019 and for the nine months ended September 30, 2020, respectively.

Its gross profit margin improved from 8.5% during the nine months ended September 30, 2019 to 10.9% for the same period in 2020, primarily due to economies of scale, increased operational efficiency and government subsidies for reductions in social security funds contributed by employers and waivers of toll charges during the COVID-19 pandemic.

Source: TechCrunch