Alibaba Group Holding Ltd’s Logistics Arm Valued At $7.7B In New Funding Round

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Alibaba affiliates seem to be on the roll. Earlier this month, reports surfaced that its financial services arm Ant Financial was raising funds from a group of existing and new investors at a valuation of $60 billion. Now Alibaba’s logistics affiliate Cainiao has confirmed that it had attracted investment from Singapore-based Temasek Holdings and GIC, and Malaysia’s Khazanah Nasional Bhd. China’s Primavera Capital also participated in the funding round.

Alibaba had founded Cainiao with two others

Cainiao did not disclose the deal size or valuation. But inside sources familiar with the deal told financial publication Caixin that the logistics company raised 10 billion yuan ($1.5 billion) at a valuation of 50 billion yuan ($7.7 billion). Cainiao was founded in 2013 by Alibaba, Intime Retail and Fosun International. The e-commerce giant held 48% stake at the time.

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It was Cainiao’s first round of external funding since its creation about three years ago. It claims to deliver 70% of China’s express packages from 128 warehouses and 180,000 express delivery stations across China. Cainiao CEO Tong Wenhong aims to deliver 200 million packages daily. The company plans to spend $16 billion over the next 5-8 years to build a network to deliver goods worldwide, including the US, Russia, Brazil, Spain and other countries.

How Cainiao improves efficiency

Besides handling packages from Alibaba’s Taobao and Tmall platforms, it also covers the delivery of groceries. As of June 2015, the company had just 700 employees. To increase its efficiency, Cainiao uses vast amounts of data on everything from delivery routes to weather patterns to order trends. Alibaba said it would further expand its “big data analytics network.”

The Chinese online retail behemoth is facing stiff competition from its smaller rival JD.com. The Hangzhou-based company is trying to maintain its lead in developing China’s fragmented package delivery business. As Alibaba penetrates further into rural areas to fuel growth, it needs to build a more robust logistics network. China’s largest e-commerce company is also expanding overseas as the Chinese economic growth cools.

Alibaba shares fell 0.45% to $73.68 in early trading Monday.

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