According to Reuters, Alibaba's supermarket chain Hema is seeking to raise capital at a valuation of about $6 billion, well below the $10 billion it had hoped for earlier this year, based on three sources.
The sources said that Alibaba had to cut its valuation expectations as the business was severely affected by the pandemic and investors were also skeptical that the loss-making Hema could keep growing and become profitable soon.
The sources also said that Hema aims to raise between $400 million and $500 million from outside investors. But the fundraising is far from finalized, and financial terms are subject to change. Hema welcomes good investors to help it grow but adds that it has healthy cash flow and no immediate pressure to raise new capital.
The decrease in valuation is due to the fact that the pandemic has affected the business prospects, and Hema is still losing money. Investors are worried about whether it can achieve profitability and maintain growth in the short term.
Regarding the above news, as of press time, there has been no press release from Hema.
This is Hema’s first independent financing since it became an independent company from the Alibaba business group in December 2021. The valuation scale of this independent financing is not only related to whether Hema can refresh the valuation ranking of Chinese supermarket chains but also important to achieve the business goal of going public within three years internally set by Hou Yi, CEO of Hema, in 2020.
According to the valuation of 10 billion US dollars (about 66.9 billion yuan) at the beginning of this year, Hema will become the first in the valuation of China's offline supermarket chain companies, and the followings are Yonghui Supermarket (601933. SH) with a total market value of 37.934 billion yuan and Sun Art Retail Group, the parent company of RT-Mart, with a total market value of HK$22.895 billion (about 19.596 billion yuan). Even with the current estimated valuation of US$6 billion (about 40.3 billion yuan), Hema is still expected to break the valuation record of Chinese supermarket companies.
Whether the valuation record of Chinese supermarket chain companies can be broken this time, we still need to finally observe the valuation of Hema and the specific figures of the IPO.
Source: Edit based on online information