Analysts have a grim forecast for Ant Group's future after its restructuring.
Bloomberg Intelligence predicts that the fintech company's valuation could drop to as low as $29 billion, from above $300 billion, after it becomes a financial holding company.
Bloomberg Intelligence analysts, Francis Chan, wrote in a report published Tuesday that Ant Group's valuation will drop after it transitions from being a tech company to a financial holding company. Chan said financial holding companies are regulated more like banks and a regulatory clampdown of its activities may send it revenue growth on a downward trajectory.
Chan forecasts that revenue growth could drop to the low teens, a big dip from the 30% growth reported by the company during its November quarter. Chan said this could drag down the company's profit prospects and consequently investor confidence.
Chan said Ant Group's valuation could drop to a range of $29 billion to $115 billion from its current $320 billion valuation.
When it restructures as a financial holding company, Chan said Ant Group's valuation will resemble those of other banks and other mainstay financial institutions. If it is treated as a traditional lender, Ant Group's valuation is unlikely to go beyond its lending peers, Chan said.
Ant Group is already facing regulatory probes on several fronts - particularly in its online lending, payments, and wealth management and insurance operations.
Chan said Ant Group's consumer lending units - Jiebei and Huabei - will be severely impacted after it is severed from Alipay. The company's Yu'ebao wealth management service could also be forced to lower its balance by regulators.
"Ant Group's future as China's fintech giant could be characterized by diminished greatness, with or without Jack Ma," Chan said.
The People's Bank of China announced the company's restructuring earlier this month. The central bank said the company has come up with a "comprehensive and feasible restructuring plan" at the behest of financial regulators.
"We believe it will limit Ant's growth prospects and also open up the market for competition. In addition, by becoming a financial holding company, Ant will be subjected to certain capital requirements and it could also lead to slower growth," analysts at Lightstream Research said.
