JD.com’s logistics arm raises $218 million
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JD.com’s logistics arm raises $218 million

Chinese online retail king JD.com, the second-largest player in the market after gargantuan Alibaba, spun off its logistics arm in 2017. Now, it’s a stand-alone subsidiary that the company retains an 81.4% stake in. But the parent has big plans for the child – amid news of cost-cutting initiatives and restructuring, JD.com has raised a $218 million investment fund that will see it partner with its offshoot, a number of “undisclosed listed companies” and government-led funds.

JD.com’s share price has risen by 30% so far this year

JD June 27

Source: Yahoo Finance

According to TechCrunch, the company plans to use this capital to invest in “smart logistics and smart supply chain technology”. It isn’t the first time JD has landed major funds for its logistics arm: last year a number of investors including Hillhouse Capital Group, Sequoia Capital and Tencent, pumped $2.5 billion into the company. Allegedly, it may also seek a public offering to drum up yet more cash.

The company’s continued fund raising is a result of earlier operational losses, and a bet that it can turn its trajectory around. Just a few months ago, JD.com’s chief executive, Richard Liu, said “the main reason [for the losses] is we had too few orders externally and too high a cost internally. You all know that the last two years have been quite difficult for the company. We have been in the loss for more than ten years. If losses continue, JD Logistics only has two years of runway left with its capital raised. I don’t think any of our delivery brothers want the company to go bankrupt.”

With new cost cutting initiatives in hand, and a slew of technical developments like drone delivery planned, JD is looking to turn around these losses and become a major player in the Asian logistics scene.

Disclosure

Dominion holds JD.com in its Global Trends Ecommerce Fund.


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