Xiaomi posts $1.4b loss in Q1 ahead of HK IPO

Beijing-based Xiaomi is one of the most hotly anticipated Hong Kong IPOs in years, taking advantage of new regulations aimed at attracting major home-grown technology companies to Hong Kong and China. The company is said to be seeking about US$10 bil
Beijing-based Xiaomi is one of the most hotly anticipated Hong Kong IPOs in years, taking advantage of new regulations aimed at attracting major home-grown technology companies to Hong Kong and China. The company is said to be seeking about US$10 billion (S$13.4 billion) in an IPO that could become the world's largest since Alibaba's listing in the US in 2014.PHOTO: REUTERS

BEIJING • Xiaomi revealed it lost 7 billion yuan (S$1.4 billion) in the first three months, as the Chinese smartphone maker prepares to persuade investors to buy into the largest initial public offering (IPO) since 2014.

The eight-year-old company has begun gauging demand for a first-time share sale intended to fuel its expansion beyond China and bankroll the development of devices and media services.

It also published its first prospectus for the sale of Chinese Depositary Receipts (CDRs) in Shanghai yesterday, saying it plans to use about 40 per cent of the proceeds to enlarge its global footprint.

Xiaomi reported revenue of 34.4 billion yuan for the first quarter.

The company is one of the most hotly anticipated Hong Kong coming-out parties in years, taking advantage of new regulations aimed at attracting major home-grown technology companies to Hong Kong and China.

The company, led by billionaire co-founder Lei Jun, is said to be seeking about US$10 billion (S$13.4 billion) in an IPO that could become the world's largest first-time share sale since Alibaba Group Holding listed in the US in 2014.

The company could also become the first to issue CDRs - a signature reform to try and reverse an exodus of China's largest companies to overseas bourses in recent years.

"In 2018, the company plans to enter or consolidate positions in South-east Asian and European markets," Xiaomi said in its Chinese prospectus, which did not mention a fund-raising target.

Xiaomi opened its first store in Paris last month, while senior vice-president Wang Xiang has said multiple times that the company is looking to sell smartphones in the US and compete against Apple.

The Beijing-based company saw sales from more lucrative smart-home devices and Internet services grow as a proportion of overall revenue in the first quarter.

Roughly 31.8 per cent of Xiaomi's revenue in 2018's first three months came from products such as air purifiers and scooters and online services such as mobile apps, according to the filing. Those two segments contributed 29 per cent of sales last year.

Its biggest business, smartphones that barely make a profit, declined in importance to just 67.5 per cent of sales from more than 70 per cent last year. Xiaomi said it made a profit excluding one-time items of 1.038 billion yuan in the first quarter.

Xiaomi survived a challenging 2016 to roar back to growth last year, bouncing back by revamping its sales model and expanding in India, where it rivals Samsung Electronics as the biggest vendor.

It is said to be seeking a US$60 billion to US$70 billion valuation in an IPO jointly sponsored by banks including CLSA, Goldman Sachs and Morgan Stanley in Hong Kong and Citic Securities in mainland China.

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A version of this article appeared in the print edition of The Straits Times on June 12, 2018, with the headline 'Xiaomi posts $1.4m loss in Q1 ahead of HK IPO'. Print Edition | Subscribe