(Yicai) Dec. 24 -- China’s JD.Com plans to spend CNY3.3 billion (USD454 million) for a majority stake in Home Credit Consumer Finance, the first wholly foreign-owned consumer finance firm in China, securing a coveted business license for this sector.

Two subsidiaries of JD.Com will acquire a 65 percent stake in Home Credit, Bank of Tianjin revealed on Dec. 20 when announcing its own participation in the Tianjin-based firm’s restructuring.

JD.Com is a major Chinese e-commerce player and financial services provider through its fintech arm JD Technology. Industry sources told Yicai that this move will not only reshape Home Credit’s future but also represent a significant step in JD.Com’s expansion in the financial sector.

Amid stricter supervision of China’s financial sector, licenses to conduct a consumer finance business have become harder to come by. Only one has been issued since 2021, noted Dong Ximiao, chief researcher at Merchants Union Consumer Finance, pointing out that Home Credit’s restructuring gives JD.Com access to this increasingly scarce resource.

Jingdong Trading, a subsidiary of JD.Com's online wholesaler Beijing Jingdong Century Trading, will invest CNY2.5 billion in Home Credit for a 50 percent stake, while Chinabank Payments, a unit of JD Technology, will shell out CNY750 million (USD103 million) for 15 percent.

China Foreign Economy and Trade Trust, Tianjin Economic Technology Development Zone Assets Management, and Bank of Tianjin will contribute CNY600 million, CNY550 million, and CNY500 million for 12 percent, 11 percent, and 10 percent, respectively. Former main shareholder Home Credit NV will retain only 2 percent.

Home Credit's financial situation suggests that Beijing-based JD.Com will have to pay a high price for acquiring the license, with its initial investment just the first step, industry insiders also said.

Since 2020, Home Credit’s financial performance has been on a downward trajectory. The data disclosed by Bank of Tianjin shows that Home Credit lost CNY3.2 billion last year following a CNY34 million (USD4.7 million) profit the year before. 

Set up in 2010, Home Credit was one of the first four consumer finance firms licensed to operate nationally in China. Initially owned by Amsterdam-based Home Credit NV, it then became part of PPF Group, one of Europe's top investment and financial groups. It has served over 84 million consumers in more than 300 cities in 29 Chinese provincial-level regions.

JD.Com's Hong Kong-listed shares [HKG: 9618] finished 0.9 percent up at HKD140.90 (USD18.14) each today. They have gained 25 percent since the end of 2023. In pre-market trading in New York, the firm’s stock [NASDAQ: JD] was up almost 1 percent at USD36.64 as of 5.37 a.m. local time today.

Editor: Futura Costaglione