Lufax IPO: What Investors Should Know About Chinese Fintech, Ant Group Rival

Ahead of the IPO of the Alibaba Group Holding BABA financial subsidiary Ant Group in China, another Chinese financial firm is set to debut. Lufax Holding is set to debut on the NYSE this week. 

About Lufax: One of the leading technology-empowered personal financial services companies in China is Lufax Holding LU.

The company offers products in the retail borrowing and wealth management segments.

Lufax seeks to meet the unmet need of small business owners and middle class investors in China who have been ignored by rival companies.

As of June 30, Lufax had a retail credit facilitated loan balance of $73.5 billion and wealth management client assets of $54 billion. Lufax ranks second and third in China for these respective business units among non-traditional financial service providers.

The company has 13.4 million borrowers for its retail segment and 12.8 million active investors for wealth management products.

Lufax has a 12% market share in the retail credit market served by non-traditional financial service providers, compared to the market leader's share of 46% to 53%.

Lufax has a much larger ticket size than all of the top five players in the market, according to the company.

The Offering: Lufax Holding plans on selling 175 million ADS at a price point of $11.50 to $13.50.

Lufax is partially owned by Ping An Group, one of the largest financial companies in the world. After the offering, Ping An will own 38.9% of Lufax.

At the high end of the pricing range, Lufax will raise more than $2.1 billion, which would make this one of the largest IPOs from a Chinese company in 2020 and one of the largest financial IPOs of the year.

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Lufax's Financials: In 2019, Lufax Holding reported income of $6.77 billion. The company saw a net profit of $1.71 billion in fiscal 2019.

The first six months of 2020 saw income of $3.64 billion and net profit of $1.06 billion.

Lufax has improved its profit margins in recent years as it increases the sizes of its loans.

Lufax's Growth Plans: China is the second-largest financial system globally. Small business financing reached $12.9 trillion in 2019 in China.

Lufax said there were $6.6 trillion in unmet loans for small businesses in China in 2019.

The small business loan and consumer loan market is expected to grow at an annual rate of 12.2% through 2024.

The personal investable asset market is worth $27 trillion in China, with only 26% of that amount currently in wealth management products.

Lufax said the current players in the wealth management market cannot meet the needs of the middle class.

The wealth management market is expected to grow at an annual rate of 19% through 2024.

The company’s relationship with Ping An Group gives Lufax access to 210 million customers that it can cross-sell products to.