Ant group-backed Kakao Pay seeks up to 1.63t won in IPO

It is the latest South Korea firm to tap capital markets in the wake of Coupang's record-breaking US$4.6b IPO in March

Published Sat, Jul 3, 2021 · 05:50 AM

Seoul

KAKAO Pay, South Korea's largest online payment service with 36 million users, is seeking to raise as much as 1.63 trillion won (S$1.94 billion) in an initial public offering (IPO) in Seoul, following blockbuster IPO filings from Kakao Bank and Krafton this week.

The Pangyo-based fintech company will sell 17 million new shares at 63,000 won to 96,000 won apiece, Kakao Pay said in a filing on Friday. At the top of the range, its market capitalisation could exceed US$11 billion. The firm is scheduled to debut on Aug 12.

Backed by Ant Group, the fintech platform is the latest South Korea firm to tap capital markets in the wake of Coupang's record-breaking US$4.6 billion New York IPO in March.

Among the companies that could make 2021 a record year for Korean floats are Krafton, the company behind hit mobile game PlayerUnknown's Battlegrounds that is planning to raise US$3.8 billion, and Kakao Bank, which is seeking as much as US$2.3 billion. Kakao Mobility and Kakao Entertainment - affiliates of Kakao Pay's parent Kakao Corp - are also considering listings next year.

"The Covid-19 has fuelled transitions to online financial service," Alex Ryu, chief executive officer of Kakao Pay, said in an interview in May.

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"We were originally targeting the IPO in 2022 or 2023 but the plan has been brought forward because of the steep growth."

Helped by easy access to the country's largest messaging service, the company has amassed millions of monthly active users and is now seeking to expand its portfolios from money transfer and payment services to securities trading and insurance.

Mr Ryu, 44, said the company's currently developing a mobile trading service, which it aims to offer on Kakao's messenger and payment apps in the second half of this year.

Kakao Pay already offers some investment products such as funds, after it acquired a local brokerage firm in February 2020.

It will directly compete against cross-town rival Viva Republica's Toss, which recently launched a securities trading service that's drew new users in their 20s and 30s.

That has prompted traditional brokerage firms such as Kiwoom Securities and Samsung Securities to rush to offer simplified mobile trading platforms to compete against fintech startups that are disrupting the market.

The mobile payment company also aims to get a final approval this year for setting up an insurance service. It intends to target a niche market with cheaper and shorter-term products designed for daily activities such as a one-day hiking trip or mobile phone damages.

Kakao Pay was spun off from Kakao Corp in April 2017, months after it signed a strategic partnership with Ant - which invested US$200 million in the payment affiliate. Kakao Corp holds 55 per cent in the unit, while Ant has a 45 per cent stake through Alipay as at May, the company said.

Kakao Pay and Alipay have a partnership to allow cross-use of their payment services, though the expansion stagnated during the pandemic as people halted overseas trips, Mr Ryu said.

With the money raised from the IPO, the Korean payment service will invest in expanding the number of offline franchises that accept Kakao's payment services.

Out of 2.5 million offline stores in South Korea, Kakao's payment service is currently available in 600,000 and it plans to expand the number of stores to as many as 1.5 million, Mr Ryu said.

Kakao Pay will also spend money for new businesses and acquisitions to help accelerate its growth, he said.

"We'd like to solidify our business basis for the next two to three years," he added. "We're at the starting line." BLOOMBERG

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