Hexindai (HX) - Another chinese P2P marketplace operator

Another Chinese P2P marketplace operator is coming to NASDAQ in the next few days - Hexindai (HX) - Some of the highlights from the registration filing

  • Nature of Business

    We are a fast-growing consumer lending marketplace facilitating loans to meet the increasing consumption demand of the emerging middle class in China.

    Through the nationwide physical networks of our cooperation partner, Hexin Group, which is majority-owned by our controlling shareholder, we source borrowers offline and conduct physical interviews as an integral part of our credit assessment and risk management process.

    On May 4, 2017, we were awarded a Level 3 Certificate for Protection of State Information Security by the Ministry of Public Security, a prestigious form of recognition awarded to financial institutions such as commercial banks for stringent information security management.

    56,000 Borrowers and 110,000 investors

  • At the offer price ($10/ADS), expected valuation will be ~420-~520 million
  • Financials
    • With a $22.9 million revenue in fiscal 2017, the net income was $8.6 million. ~37.5% net profit margin
    • For the 3-months ended June 30, 2017 - net profit margin was ~59%
    • Cash on-hand is $~32.5 million (out of $39 million of total assets)
  • Principal Shareholders
  • As expected, HX uses VIE structure as well, and most likely 100% of the revenue comes thru the VIE. The biggest risk would be the Regulatory risks for all these P2P companies. Following risks are from the filing document related to VIE structure -

    If the PRC government decides that our contractual arrangements under the variable interest entity structure do not comply with PRC regulations, or if the regulatory environment changes, we may have to change our business model and/or be subject to penalties.

    Our contractual arrangements with our variable interest entity may not be as effective as direct ownership and operational management.

    Our business relies on the contractual arrangements with the variable interest entity and the cooperation arrangements between the variable interest entity and Hexin Group, if any of these entities or their shareholders fail to perform their obligations, our business and results of operations may be severely adversely affected. There may be conflicts of interest between shareholders of the variable interest entity and us, which may cause material and adverse effects to our business and financials.

    Our contractual arrangements with the variable interest entity may be subject to additional taxes, which would adversely affect our financials and your investment.

    If the variable interest entity goes bankrupt or becomes subject to a dissolution or liquidation proceeding we may not be able to recover or claim ownership over the assets and networks of the variable interest entity.

    If our variable interest entity loses its chop to the theft and use of unauthorized persons, the corporate governance of the variable interest entity may be severely and adversely compromised.