Banking & Finance

Rich pickings

We profile Oriza – the pre-IPO investment firm behind SF Express

WangWei w

Oriza invested in Wang Wei’s firm

SF Express is known as an express courier but since its backdoor listing on the Shenzhen stock exchange last month, it has been delivering something else: one of the most stellar stock performances, even by Chinese standards.

The company’s shares climbed the 10% daily limit for five consecutive sessions after its quasi-IPO. At one point last week, it was worth Rmb300 billion ($43 billion), more than the trio of China’s leading airlines combined. That prompted one of the “Rich List” compilers to crown SF boss Wang Wei as Hong Kong’s richest man, deposing Li Ka-shing (Wang is a resident of the city).

Such a strong market debut is the stuff of dreams for investment bankers. But which pre-IPO investors have prospered most?

To get the ear of the low-key Wang, it helped to be a government-backed investor. In late 2013, SF sold a 24.5% stake to a number of state firms for Rmb8 billion. China Merchants grabbed most of the attention, as industry insiders speculated on the potential synergies between SF and its Shenzhen neighbour’s logistics empire. But SF’s blockbuster IPO has also put an influential investment fund into the spotlight. Oriza Holdings was another of the lucky few to cut a pre-IPO deal with SF. At the time, it valued the courier firm at Rmb32 billion, suggesting that Oriza could exit with a staggering 10-times gain today. But that doesn’t look like happening: 21CN Business Herald reported this week that Oriza is sitting on its 6.37% stake and may increase it.

Oriza has pulled off other landmark deals that have other funds feeling envious. In 2015 it teamed up with China Media Capital (founded by China’s Rupert Murdoch Li Ruigang, see WiC218) to establish CMC Holdings, the pioneering private equity fund in the now-booming sports and culture sectors. CMC’s seed money totalled Rmb10 billion (both Alibaba and Tencent have contributed too) and local media outlets describe it as “the kingmaker in China’s sexiest industry”.

CMC’s local investments have been lower key but it did grab international headlines by investing in Manchester City, and in Hong Kong by buying a third of terrestrial broadcaster TVB.

Oriza’s origins can be traced back to 1994, when Singapore’s then leader Lee Kuan Yew signed a deal with the Chinese government to jointly develop the Suzhou Industrial Park. (Singapore disengaged from the project in 1999 after the Asian financial crisis.) A direct investment firm was set up to funnel much-needed capital to tech start-ups at the park. In 2011 this was consolidated into the Suzhou Venture Group (SVG) and the firm eventually became today’s Oriza.

In 2010 SVG partnered with the China Development Bank to set up a Rmb60 billion fund of funds. It was the first state-backed fund of funds, helping to drive capital into industries defined as strategic (or, in some cases, companies handpicked by local governments). Other funds flocked around it for capital. “It was the pier that all venture capital firms wanted to park at when they were raising funds,” 21CN reports.

Oriza has now been restructured into an investment holding firm with assets totalling Rmb41 billion. And according to 21CN, despite its origins Oriza takes on an entirely market-oriented approach in identifying its investment targets.

“It is important to maintain a good relationship with local governments but we always say no to projects that could jeopardise our reputation,” a senior partner told the newspaper.

The company tries to hold true to some of its roots, convening the annual “1,000 Start-ups Contest” at Suzhou Industrial Park to identify local tech entrepreneurs. Further afield it has also set up a venture capital unit in Silicon Valley, investing in more than 30 American start-ups since 2015. Time will tell if there is another SF Express jackpot investment in its now diverse portfolio.


© ChinTell Ltd. All rights reserved.

Brought to you by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.