Beijing 30

Chinese Car-Booking Industry Attracts Private Equity Investment

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July 8, 2015

 

The Chinese markets are currently experiencing quite a bit of turmoil, but investor appetite in the country remains steady. One sector, which has attracted plenty of private equity interest in recent months, is the booming car-booking sector. Big players in the industry, such as Didi Kuaidi, have attracted funding from a number of private equity firms.

 

Didi Kuaidi Reports

 

Most recently, Bloomberg’s sources suggested Didi Kuaidi has received funding from both Ping An Insurance Group and Capital International Private Equity Funds. Furthermore, firms such as Hillhouse Capital Management and Coatue Management are set to be investing in the car-booking business.

 

The investment by the notable private equity firm together with the other investment groups is thought to provide nearly $2 billion worth of funding. This would give the large Chinese business a company valuation of nearly $15 billion.

 

Just last month, the parent company of Didi Kuaidi, Xiaoju Kuaizhi Inc., told the initial fundraising efforts hit their targets and went beyond in just five days.

 

The Wall Street Journal speculates that the latest fundraising effort could be the largest equity fundraising effort for a venture-backed company in a single private placement.

 

The US-based private equity firm, Capital Group has strong background in investing in emerging markets. Its six funds have commitments of nearly $7 billion in different parts of the world.

 

Tough Competition

 

The industry is currently going through a heated battle for market positions. Two of the biggest Chinese apps in the sector, Didi and Kuaidi, merged earlier this year. The two were previously in competition with each other, but wanted to control costs by creating a single ride-sharing platform.
But Didi Kuaidi is facing stiff competition from Uber, which is desperately trying to get into the market. Uber has been involved with its own fundraising efforts and managed to receive a big investment last year when Baidu, China’s largest search engine operator, bought a stake in the company in December. The company is currently fundraising specifically for the Chinese operations under UberChina.

 

According to Bloomberg, private car request have surged in China, with nearly 3 million daily rides occurring on the Didi Kuaidi platforms. Didi Kuaidi said in June that it expects gross merchandise volume to hit $12 billion by the end of 2015.

 

Private Equity Interest

 

As user figures sore, the interest by private equity firms is likely to increase. Firms are actively looking for investment opportunities in this global market. Hillhouse Capital Management firm, said to be investing in Didi Kuaidi, is also involved with Uber. The Beijing-based company is said to be investing only on Uber’s global operations, excluding its Chinese ventures.

 

Furthermore, Warburg Pincus led a group of investors in a fundraising effort into a new company called eDaijia. The company operates similar to the other car-booking services and has ventured into overseas markets. The private equity firm-led fundraising effort managed to raise $100 million for this new business.

 

The competition in the sector is likely to increase and more private equity firms may well be convinced to get involved in the lucrative sector. It remains to be seen which car-booking service manages to reap the biggest rewards.

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