Courier's funding set to pave way for industry's first IPO, analysts say

Quanfeng Express, a Chinese courier that started operations in July 2011, has attracted investment interest from private equity companies to raise margins and enlarge market share.

The funding is likely to pave the way for the first initial public offering in the industry, analysts say.

Leading Capital Fortune Ltd, Beijing Pengkang Investment Co Ltd and Phoenix Capital Asset Management have announced they will inject 200 million yuan ($32.1 million) into the courier to bolster its nationwide expansion, said the company's president Chen Jiahai.

"The collaboration shows that investors are optimistic about Quanfeng's business model and prospects. We are grateful for the confidence from investors and believe the cooperation will help enhance the service quality of the industry," Chen said.

Quanfeng's existing shareholders maintain the controlling right in the company, and investors will only intervene on financial issues other than daily operation, company spokesman Dai Changzheng said.

The company aims to turn itself into a mid-to-high-end express delivery firm, following in the footsteps of SF Express (Group) Co, which charges double for same-city deliveries compared with local rivals, Dai said.

Aided by the funding, the company also plans to seek a listing in three to five years, according to Dai.

Dai said Quanfeng targets small parcels weighing less than 5 kg, and focuses on cross-town businesses in first-tier cities such as Beijing, Shanghai and Guangzhou.

Greater supervision of the industry has been called for after postal authorities canceled the licenses of 116 couriers in the past year for allegedly losing mail and poor sorting.

Such complaints plague China's fragmented but booming express delivery industry, where delay, damage and loss of packages continually erode operators' reliability and reputations.

"We want to guarantee customers speed, safety and quality of services, so that they are willing to pay more for our services," Dai said.

China's express delivery sector was worth 48.9 billion yuan in the first half of 2012, according to China Express and Logistics Consulting, an independent logistics think tank.

Xu Yong, principal analyst with the consultancy, said private equity companies are betting on the delivery industry because they believe in its long-term development fueled by booming e-commerce.

Xu said 200 million yuan is far from sufficient to build a nationwide network, but may lay the groundwork for more aggressive funding opportunities.

Compared with inter-regional and international businesses, cross-town delivery enjoyed the fastest year-on-year growth of 54.5 percent in the first quarter of 2012, with revenue reaching 2.02 billion yuan, according to a report by China Venture Group, a leading Chinese private equity research agency.

In the next five years, many couriers will streamline their businesses, with companies with a specialized business focus seeing rising opportunities, the report said.

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