China’s Tiandihui and Italy’s Vailog setup $728 million to logistics network

Tinuku - Shanghai Tiandihui Supply Chain Management, the mainland’s largest online road transport operator, has teamed with Italy’s Vailog that specialises in development and investment of logistic properties, to launch a 5 billion yuan fund (US$728 million) to build 20 logistics hubs across the mainland.

Xu Shuibo, founder and chief executive of Tiandihui, said on Saturday that the priority for the start-up was to turn profitable this year, adding that the company will use the funds to build facilities to better handle cargo flows for clients.

Tinuku China’s Tiandihui and Italy’s Vailog setup $728 million to logistics network

“We are still focusing on network expansion to stay ahead of the competition,” Xu said.

Tiandihui whose online platform matches lorries with cargo in 60 mainland cities, expects to double transactions value to more than 200 billion yuan in 2018. For the first half of 2018, more than 100 billion yuan of transactions were conducted via its platform covering 60 mainland cities and 300 routes.

The company plans to increase the number of routes to 1,000 over the coming few years. The company collects fees for its services, which hit 5 billion yuan in 2017. The CEO said the revenue would more than double this year to 10 billion yuan. Last year, about 80 mainland transport businesses received a combined 100 billion yuan of investment.

“Capital is needed to spur the growth of China’s logistics industry development. The country has to build a complete ecosystem for road transport with an influx of capital,” said Cui Zhongfu, vice-director of the China Federation of Logistics and Purchasing, a government-backed industry consortium.

China’s logistics sector, known for its low efficiency, has more than 8 million transport firms, 90 per cent of which are small-scale and individually owned. Tiandihui, dubbed as China’s CH Robinson, a US multimodal transport services provider, was established five years ago. It uses internet technologies to slash redundant logistics costs for manufacturers.

Earlier this year, it raised 500 million yuan in the third round of financing led by CICC Jiacheng Investment Management, a subsidiary of investment bank China International Capital Corp. Xu also said the company’s plans for an initial public offering were on track, but declined to disclose where the shares would be listed.

But Xu added that the policy change on Chinese depository receipts (CDR) would have no impact on its IPO plan. Beijing introduced the CDR system in early 2018 to lure back the country’s best tech companies funded by foreign investors. But it put the plan on ice in June because of a market slump and a lukewarm response among tech businesses.

If it were to report profits this year, Tiandihui would meet the earnings requirements of mainland securities regulators for an A-share IPO. Tiandihui is valued at about 8 billion yuan at present.