Tencent, Sequoia and China Life Lead $2.5B Financing Round for JD Logistics

It’s been less than 10 months since JD.com launched its own logistics business, but the warehousing and shipping subsidiary of China’s second-largest ecommerce player has already raised $2.5 billion from some of the mainland’s biggest investment firms, according to an announcement by the company today.

An all-star consortium including Tencent, China Life, ICBC International, Sequoia China, Hillhouse Capital, China Merchants Group, China Development Bank Capital FOF and China Structural Reform Fund has agreed with the Beijing-based online marketplace to take up equity stakes in JD Logistics, which was spun off as an independent concern in April last year.

“Our decision early on to build out our own logistics network has paved the way for JD Logistics to become the industry leader it is today,” Richard Liu, Chairman and CEO of JD.com said in a statement. He added that, “JD Logistics will continue to support both JD.com’s e-commerce business and the logistical needs for a wide range of industries for years to come.”

Following the new investment, which is expected to close during the first quarter of this year, JD.com will remain the majority shareholder in JD Logistics with an 81.4 percent stake.

JD Builds on Portfolio of 405 Warehouses

Liu, who founded JD.com in 2004, made it clear that his company’s approach to warehouses and packages will stress technological innovation. “This current funding round sets the stage for us to further invest in expanding our lead in the sector in areas like automation, drones and robotics,” Liu commented in the statement.

Now a Fortune 500 concern, JD.com started operating its own logistics system in 2007, and set up the shipping and warehousing subsidiary last year in an attempt to capitalise on the rising demand for logistics space and services in China. As of the end of September last year JD.com already operated 7 fulfillment centres and 405 warehouses spanning more than 10 million square metres of space across China, including facilities specialising in cold-chain storage and cross-border trade.

At the end of last year, JD Logistics CEO Wang Zhenhui declared that his firm was already in the black. “JD Logistics has been profitable. The orders from third-party seller platforms and outside partners have witnessed rapid growth, which surpassed the growth rate of JD’s self-owned orders,” the executive said in an account in the China Daily.

China Life and Hillhouse Sign Up for More Sheds

Among the investors taking a slice of JD.com’s logistics offering are a number of players familiar from other warehouse investments in recent years. Chinese superinvestor Zhang Lei’s Hillhouse Capital took a 21.2 percent stake in the $11.6 billion management-led buyout of Global Logistic Properties last July, and Tencent made its own logistics in 2014 when it invested just under $200 million in logistics developer China South City Holdings.

Just last week China Life increased its participation in GLP’s mainland business by backing a $1.6 billion value-added fund set up by the logistics developer, and the insurance titan had invested $1 billion into the Singapore-listed developer’s US portfolio in 2015.

The success of ecommerce firms such as JD.com and its competitors at Jack Ma’s Alibaba Group has helped spark the growth of modern logistics in China, with warehouse rental rates growing by an average of more than eight percent last year in Shanghai, Shenzhen and other major mainland cities, according to data from Singapore’s DBS Bank.