Didi Kuaidi in record-breaking $2b capital raise

The Chinese taxi hailing app company and Uber rival's capital raise is the world’s largest-ever by a single private company and could yet get bigger.

Didi Kuaidi said on Wednesday that it raised $2 billion in the largest single fund-raising ever by a private company, outpacing even Facebook's capital raise before it was listed.

The injection of capital in the Chinese taxi hailing app company and up-and-coming Uber rival was led by new investors Capital International Private Equity Fund and Ping An Ventures, who took up the bulk of the deal, according to a source familiar with the matter. But also roped in were existing stakeholders Alibaba, Tencent, Temasek, and Coatue Management.

More than 10 investors participated in the private placement, a well-balanced mix of long-only institutional investors and hedge funds. Geographically, it was a fairly even split between Asian and US investors, the source familiar with the matter said, noting very strong interest out of the US.

A second source familiar with the matter said the fund-raising valued Didi Kuaidi at $15 billion. 

China Renaissance and Credit Suisse were joint financial advisers to the fund raising, which kicked off two weeks ago. Didi Kuaidi said that due to tremendous interest from global investors it could yet raise a “further few hundred million dollars from new investors” before the final closing in the next month.

Didi Kuaidi was formed from the merger in February of China's two largest taxi-hailing app firms — Didi Dache and Kuaidi Dache. Despite its relative youth, the company has attracted a substantial amount of private capital from blue-chip investors. 

“The fact that global investors are eager to participate in this fundraising round shows their confidence in the development of our company,” Didi Kuaidi's chief executive officer and chairman Cheng Wei said in a release.

Private capital

The $2 billion deal reflects the growing depth and breadth of private capital that has allowed relatively young dotcom companies to raise multiple rounds of financing within a short period of time. It is the second private placement for Didi Kuaidi this year, after it raised an unspecified amount in April.

Didi Kuaidi has attracted private funds at a time when public capital markets are frozen in China, with the Chinese regulator calling a halt to new IPOs. The secondary market remains close to meltdown, with about 1,500 companies — or half of the stocks listed in China — filing for trading suspensions as of July 8.

However, since Didi Kuaidi is a private company it is not directly impacted by the A-share market's woes, noted the first source close to the deal. “A lot of the international [investors] don’t play heavily in the A-share market. They’re more US-driven,” the source said. “This makes private deals more attractive for investors. There’s no mark-to-market pressure.”

As a result, Didi Kuaidi now has cash at hand as competition prepares to heat up in China, with Silicon Valley cab company Uber looking to raise funds to help it expand in the country. Didi Kuaidi’s cash reserves are expected to grow to more than $3.5 billion, making it the largest company by cash reserves within China’s mobile internet industry.

Didi Kuaidi also has the backing of major investors such as Tencent and Alibaba. "As a strategic shareholder, Tencent will fully support Didi Kuaidi’s platform strategy with the goal of better matching users and services through the mobile internet,” said Martin Lau, who is both a director of Didi Kuaidi and president of Tencent. Rival Baidu last year invested in Uber.

Didi Kuaidi, naturally, believes the Chinese market has huge potential. “With the increasing penetration of mobile technology and internet service, the market for taxi and private cars has the potential to grow another 10 to 15 times,” Cheng said in the company release. “We aim to create a mobile transport ecosystem that will displace private car ownership and become a part of the daily life of Chinese citizens.”

Didi Kuaidi said it plans to add car-pooling, chauffeur, and bus services in the future.

Based on data from Analysys International, Didi Kuaidi currently has a dominant leadership in private car services with an 80% market share. For taxi-hailing, Didi Kuaidi holds 99% of the market with 3 million daily rides, covering 80 cities.

The cab company is also looking at potential new growth areas. “Didi Kuaidi aims to develop a transportation ecosystem and may also tap into logistics, insurance, auto financing, mapping technologies, and location-based services,” Didi Kuaidi's Cheng said. 

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