BEIJING: China has imposed a sweeping restructuring on Jack Ma's Ant Group, the fintech group whose record US$37 billion IPO was derailed by regulators in November, underscoring Beijing's determination to rein in its Internet giants.
The overhaul, which has been in the works for several months, includes Ant turning into a financial holding firm, a move expected to curb its profitability and valuation.
It comes two days after e-commerce giant Alibaba Group, of which Ant is an affiliate, was hit with a record US$2.75 billion antitrust penalty as China tightens controls on the "platform economy".
The restructuring, directed by China's central bank, means Ant will be subject to tougher regulatory oversight and capital requirements, likely cutting its valuation from the tech-style pricing of US$315 billion it had secured in the run up to last year's foiled IPO.
However, the measures do not call for the break-up of Ant, whose business spans payments, wealth management and consumer lending. Its Alipay app has more than 730 million monthly users in China and handles more transactions a year than Mastercard and Visa.
"Ant Group attaches great importance to the seriousness of the rectification," the company said in a statement.
As part of the restructuring, Ant said it would set up a personal credit reporting company, which will comply with relevant laws and strengthen the protection of personal information, and effectively prevent the abuse of data.
Ant will apply for a licence for the credit reporting company, it said.
"The restructuring plan is stricter than expected," said Dong Ximiao, chief analyst at Zhonggguancun Internet Finance Institute, who said Ant would need at least 200 billion yuan (US$30.56 billion) in registered capital to comply with the capital adequacy rule for financial holding companies.
"There's less uncertainty now as the restructuring plan finally lands, but we still need to wait and see how Ant implement all those requirements during the process."
Reuters reported in February that Ant planned to spin off its consumer-credit data operations, as hiving off the treasure trove of data on more than 1 billion people was a key part of its business overhaul in response to the regulatory crackdown.
Ant, which began as Alibaba's payments arm, sits on an enormous cache of consumer data. That is the backbone of China's Internet platforms, with companies offering financial products from consumer loans to investment products via smartphones.
Ant's revamp comes against a backdrop of uncertainty over Ma's empire that has extended to the billionaire himself. He finally emerged in public in January, ending months of speculation over his whereabouts.
The People's Bank of China said that under a "comprehensive and feasible restructuring plan", Ant would cut the "improper" linkage between payments service AliPay, virtual credit card business Jiebei and consumer loan unit Huabei.
The central bank also asked Ant to break its "monopoly on information and strictly comply with the requirements of credit information business regulation".
The company agreed to improve corporate governance and to resolve activity in its credit, insurance and wealth management units that had breached rules, the central bank said.
The central bank said it had also asked Ant to control its leverage and product risks, and control the liquidity risk of its flagship fund products and to "actively lower" the size of its massive Yu'eBao money market fund.
The measures "set an example" for financial regulation of the platform economy", the state-backed Economic Daily newspaper said in a Monday commentary.