Caixin
Aug 20, 2019 04:41 AM
BUSINESS & TECH

Exclusive: JD.com Online Grocery Unit in Talks for U.S. Listing Next Year

Dada-JD Daojia is considering a U.S. listing to raise as much as $1 billion, a source says. Photo: VCG
Dada-JD Daojia is considering a U.S. listing to raise as much as $1 billion, a source says. Photo: VCG

Dada-JD Daojia, the online grocery and delivery venture of China’s e-commerce giant JD.com, is in talks for a U.S. initial public offering (IPO) next year to raise between $500 million and $1 billion, Caixin learned from a person close to the company.

Dada-JD Daojia has launched talks with several banks and investment banks for an IPO on Nasdaq in 2020, according to the person, who is close to the company’s senior management. The company is seeking cornerstone investors for the offering, said the person, who declined to be named.

Dada-JD Daojia was formed in April 2016 by merging crowd-sourced logistics provider Dada and JD.com’s online-to-offline e-commerce arm JD Daojia. The company completed a $500 million funding round in August last year from JD.com and U.S. retail giant Walmart Inc. JD.com currently holds 47.5% of Dada-JD Daojia, while Walmart owns 10%.

Dada-JD Daojia started considering a U.S. listing late last year and has launched internal restructuring as preparation, the source said. Money raised from the offering will be mainly used to supplement operating capital and provide incentives for customers and delivery staffers.

Dada-JD Daojia declined to comment.

Shoppers can now place orders for groceries and fresh food from Dada-JD Daojia’s platform, which connects with more than 100,000 supermarkets and grocery stores. Since late 2016, Dada-JD Daojia has included some Walmart stores in its system. Now, the platform connects with 290 Walmart stores, or 70% of Walmart’s total stores operating in China.

The IPO plan reflects Dada-JD Daojia’s needs for more capital to expand in China’s white-hot online grocery market and compete with rivals including Meituan Dianping, Alibaba-backed Ele.me and Hema.

A company employee said the platforms compete fiercely and rely heavily on subsidies to attract new shoppers and expand market share. Dada-JD Daojia has spent on average of 80 million yuan ($11.4 million) monthly on incentives to customers and delivery people, exceeding revenue, the source said.  

Dada-JD Daojia has tried to cut subsidies to its delivery team, but that has led to worker departures and a decline in orders, the source said.

“Compared with food takeout, grocery delivery is less frequent, and it is more difficult to support a huge crowd-sourced delivery team,” the source said, adding that the company is actively seeking new business fronts.

Caixin learned that Dada-JD Daojia has posted widening losses over the past two years. The company said in a statement that the losses are within expectations and the company is optimizing operations to reduce losses. Dada-JD Daojia has seen business improving with fast revenue growth and declining debts. It posted a 300% annual compound growth rate for revenue with an 11% widening of losses, the company said.

Last week, JD.com reported stronger-than-expected second-quarter earnings with net income swinging to 618.8 million ($90.1 million) from a loss of 2.21 billion a year ago. Revenue rose 22.9% to 150.28 billion yuan from 122.29 billion yuan.

Contact reporter Han Wei (weihan@caixin.com)

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