China put stricter restructuring plans than expected for Ant Group; An affiliation of Alibaba

China has brought restriction on Jack Ma’s Ant group, whose IPO of $37 billion was halted by the regulators in November.

Ant expected that by turning into a financial holding firm, it can curb its profitability and valuation by shortening some of its easy-going businesses.

The overhaul came in two days after Jack Ma’s Alibaba Group Holding, which is affiliated with Ant, was fined $2.75 billion as the country tightens its control on its booming economy.

China’s central bank directed the overhaul expects that there would be tougher restrictions – regulatory oversight and capital requirements, and it demands Ant to cut all its link from Alipay and its other business.

Lightstream Research analyst Oshadhi Kumarasiri, published in Smartkamra that “This restructure effectively splits Ant into a few independent businesses to stop Alipay from being super app capable of controlling the day to day lives of the Chinese people.”

Based in Hangzhou, Ant was positioned as a tech firm in 2108 when it raised a record of $14 billion at a valuation of $150 billion, making it the world’s largest fundraising. As per some reports, some global investors on the basis of Ant’s performance value it at $200 billion.

Shares on New York-listed Alibaba went up by 8% after its Monday’s announcement. Similar growth was tracked in its Hong Kong shares.

Ant began as Alibaba’s payment arm, now has an enormous cache of consumer data. It is considered to be China’s internet platform’s backbone with companies offering financial products from consumer loans to investment products via smartphones.

Ant would need 200 billion yuan i.e. $31 billion, in registered capital in order to comply with the capital adequacy rule for the financial holding companies, as per Dong Ximiao, chief analyst at Zhongguancun Internet Finance Institute.

“The restructuring plan is stricter than expected,” says Ximiao. “there’s less uncertainty now as the restructuring plan finally lands, but we will have to wait and see how Ant implements all those required during the process,” he adds.