Ant gets approval to expand its consumer finance business

BEIJING – Ant Group’s consumer finance unit has secured approval to more than double its registered capital, marking progress in resolving regulatory issues.

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

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

Ant is launching a consumer finance company in 2021 as part of a restructuring.

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

Ant will still hold a 50% stake in the consumer finance company, according to the announcement. New investors in the other half of the company include entities supported by the government of Hangzhou and Sunny Optical Technology.

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

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

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

China’s banking regulator said companies have six months to complete the changes before the capital expansion agreement becomes invalid.

Chinese media previously reported news of the agreement, the terms of which were not publicly released.

– CNBC’s Arjun Kharpal contributed to this report.