Shares in Hexindai, China’s fifth biggest P2P lender, surged more than 60 per cent on its Nasdaq debut on Friday, shrugging off looming concerns of possible tighter scrutiny on P2P lending platforms by Chinese authorities.
Shares in the company traded up 65 per cent to US16.50, just 20 minutes into the listing under the symbol HX, from its offering price of US$10 per American depositary share. The company aims to raise up to US$88 million through the flotation.
“What our American investors care most are the potential policy risks China’s P2P sector faces,” said Zhang Qisen, CFO of Hexindai, during a phone interview on Friday.
“In the next two years, there’s unlikely to be any new regulations rolled out by the authorities as there is already a set of established rules for the P2P sector.”
Zhang also said the company would collaborate with firms like wedding planning agencies, education providers, as well as medical cosmetology operators in future to expand its customer base.
“In general, we want to associate with companies that can create more consumption to increase the number of our mainly middle-class customers,” he said.
China’s consumer lending market is projected to reach 500 billion yuan (US$75.7 billion) at the end of 2018, according to Beijing-based consultancy iResearch. But with such rapid growth, tighter scrutiny by the authorities is also possible.
Since last year the Chinese financial watchdogs have stepped up efforts to contain risk in the sector, after the high-profile online P2P platform Ezubao was found to have fabricated 95 per cent of its projects, involving more than 900,000 investors in 2016.
Reports also emerged recently that China is to tighten its grip on payday loan lending platforms, with some players found guilty of “illegal activities” facing being shut down, according to mainland media Yicai Global, citing unnamed sources.
Hexindai had around 50,000 active borrowers and 110,000 investors at the end of June, and facilitated 9.7 billion yuan worth of loans since its founding in 2014 to date, according to the company.
It posted net profit of US$8.5 million for 2017, a 142 per cent increase on last year on the back of US$22 million in revenue for the period.
Like many of its P2P peers, Hexindai mainly engages in unsecured, medium-sized consumer loans, where customers seek around 20,000 to 140,000 yuan in credit with repayment periods stretching from 2-3 years, making up around 62 per cent of China’s whole P2P lending market.
Hexindai’s bigger peers including Yirendai, listed in the US in 2015, and China Rapid Finance, which launched a US$60 million IPO in April.
Shares in Yirendai have surged 108 per cent this year so far, while stocks in China Rapid Finance have added 22 per cent.
Despite the potential policy risks, analysts remain upbeat about the sector, however.
“We expect the online cash-credit industry to grow under stricter regulation” said Vicky Wu, an analyst at Industrial and Commercial Bank of China.
“Companies with strong big data capability and low-cost fund sources may enjoy long-term sustainable growth.”