ALIBABA Group Holding is putting a potential Hong Kong initial public offering (IPO) of its Freshippo grocery chain on the backburner amid weak sentiment for consumer stocks, people with knowledge of the matter said.

After early talks to sound out potential investors, the Chinese tech giant concluded it could likely achieve a valuation of around US$4 billion for Freshippo in the listing, below its initial expectations, the people said. That’s lower than the US$6 billion to US$10 billion value the firm was targeting when it considered raising a private funding round at various points last year, the people said.

Alibaba’s capital management committee, which is overseeing the breakup of the sprawling company, recently decided to wait for a more favourable market before moving forward with a Freshippo IPO and will prioritise listings of other units, the people said.

Any delays could mean Alibaba misses its stated target to float Freshippo by May 2024. To be sure, Freshippo could move forward with its listing plan once China’s broader retail environment and economy start picking up, improving investor sentiment around the sector, the people said. The company is ready to submit a preliminary prospectus any time, one of the people said.

Representatives for Alibaba and Freshippo declined to comment.

Freshippo provides a Sam’s Club-like supermarket experience that includes a dine-in restaurant as well as 30-minute home delivery. It even offers cooked lobsters and grouper freshly chosen from fish tanks in its store. The company’s main grocery brand Hema Xiansheng turned profitable in 2022, according to a company website citing an internal memo from Hema chief executive officer Hou Yi.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The unit was set to be among the first Alibaba units to go public after the Chinese tech giant made a surprise announcement in March that it would split up its business. The cloud division, which is among the six main units created via the breakup, is weighing a private round to raise funds from Chinese state-owned enterprises ahead of its listing by introduction in Hong Kong, Bloomberg News has reported.

Started in 2016, Shanghai-headquartered Freshippo had more than 270 self-operated stores across China at the end of March last year, according to its website. It facilitates high-tech automatic order picking that transports goods via conveyors attached to the roof of the store, and uses robots to deliver food for its dine-in customers. BLOOMBERG