You are here
China's Didi said to weigh raising billions in fresh capital
[HONG KONG] Didi Chuxing, the ride-hailing service that acquired Uber Technologies Inc's China business last year, has held informal talks with investors about raising billions of dollars to buy more time to build a profitable business model, according to people familiar with the matter.
Didi's investors, numbering more than 100, are divided over whether more capital is needed now, said the people, asking not to be named because the matter is private.
Fundraising advocates argue more cash will help Didi develop autonomous driving technology and create a lucrative platform for services amid tighter ride-hailing regulations.
Skeptics contend the firm has enough cash given the US$10 billion it had amassed last year and that raising more equity will only dilute existing shareholders, the people said.
Didi, with backing from Apple Inc and Tencent Holdings Ltd, hasn't notified some investors because it hasn't decided whether to proceed, the people said.
Sun Liang, a Didi spokeswoman, denied the company is looking for more capital.
"Didi has no such fundraising plans," she said in an email.
Some investors have approached Didi about investing more capital, rather than the company taking the initiative, one of the people said.
If it goes ahead with a deal, Didi is likely to seek at least US$3 billion and is discussing whether it can hike its valuation, now US$34 billion, another person said. Didi may ultimately decide not to proceed with the fundraising, the people said.
The Beijing company, led by Chief Executive Officer Cheng Wei, has gone through a tumultuous stretch after fending off Uber's incursion into China last year. Chinese policy makers legalised ride-sharing in the country, but imposed stringent rules that have hampered expansion. Among the regulations, drivers are required to be local residents to operate in large cities like Beijing and Shanghai, reducing the supply of cars that had been operated by rural workers seeking better pay.
That has hampered Cheng's ability to make money. By raising additional funds, the company could buy more time to develop its self-driving technology and postpone an initial public offering that would demand stronger financial performance, the people said.
The company had previously been aiming for an IPO in 2017, people familiar with the matter said last year. In addition to Apple and Tencent, Didi's backers include China's national sovereign wealth fund, Alibaba Group Holding Ltd. and DST Global.
Didi has reigned supreme at home by offering services including taxis, private cars, limousines and bus services. As it doesn't charge taxi drivers any fees, the bulk of its revenue comes from taking a commission from rides in private cars and limos.
About two dozen cities across China have issued or are issuing new rules, most requiring such vehicles to be locally registered and feature higher-quality standards and specifications. A stipulation on minimum wheelbase width for example ruled out more than 80 per cent of the service's cars in Shanghai, Didi said in October.
While the national government has formally allowed on-demand car sharing services to exist, administrators at the provincial level can set different rules to protect vested interests.
Taxi licenses are typically issued by local administrations for a fee, according to the official Xinhua News Agency. The rights are licensed to cab companies that then sublease it to drivers, who in turn hand in a cut of their revenue.
Leveraging its data from the 300 million users across some 400 cities in China, Didi is racing against Alphabet Inc and Baidu Inc to develop driverless technology.
Founder Cheng said in an interview in September that one of the key reasons the company agreed to call a truce and acquire Uber's China business was to focus more attention on the battle in automated driving.