Tiantu is a leading private equity investor and fund manager committed to driving the growth of Chinese consumer brands and companies. We manage capital for institutional investors and high-net-worth individuals, and make investments through our funds under management and directly using our own capital.
We manage capital mainly through our funds. As of March 31, 2023, our funds contributed approximately RMB20.4 billion out of our total assets under management (“AUM”) of approximately RMB25.5 billion. We managed eight Renminbi-denominated funds and three U.S. dollar-denominated funds as of March 31, 2023, and launched three new Renminbi-denominated funds after the Track Record Period and up to the Latest Practicable Date. These funds are financed with a mix of capital raised from external investors and our own capital. As of March 31, 2023, external capital represented 82.0% of the total committed capital for our managed funds, which was raised from 98 fund investors, while we contributed 18.0% with our own capital in our capacity as a general partner or as a limited partner. Our fund investors consist primarily of institutional investors including renowned multinational corporations and financial institutions, government guiding funds, and high-net-worth individuals. In addition to our managed funds, we also manage our own capital and make direct investments to seek optimal returns. As of March 31, 2023, approximately RMB5.1 billion of our total AUM was under direct investments. We receive fund management fees and carried interest from our managed funds and also recognize investment gains as we make investments with our own capital.
Our endeavor and commitment trace back to 2002, when our chairman Mr. Wang Yonghua founded our predecessor. We were the first consumer-focused investment firm in China according to CIC, and have been specializing in investments in the consumer industry for more than a decade. In a survey of over a hundred entrepreneurs in the consumer business conducted by CIC, over 80% of them think of Tiantu as a “consumer focused investment expert,” and approximately 56% of them believe we help with the upgrading of consumer brands in China.
According to CIC, the number of our investment projects in China’s consumer industry from 2020 to 2022 ranked no. 3 among all private equity investors after Tencent Investment and Sequoia China, and ranked no. 1 among all consumer-focused private equity firms over the same period; our AUM as of December 31, 2022 ranked 130+ among more than 7,000 private equity investors in China, including private equity investment arm of conglomerates, multinational corporations and state-owned financial institutions, and no. 2 among more than 20 consumer-focused private equity firms in China. As of March 31, 2023, we had a total of RMB25.5 billion assets under management, including RMB11.0 billion managed through consolidated funds, RMB9.4 billion managed through unconsolidated funds and RMB5.1 billion for direct investments. As of March 31, 2023, our funds had raised a total committed capital of RMB11.1 billion from external investors, with 95.7% from institutional investors and 4.3% from high-net-worth individual investors, and another RMB2.4 billion from our own capital.
We see the golden era of China’s consumer industry right at the horizon. China’s consumer industry increased from RMB43.8 trillion in 2017 to RMB55.7 trillion in 2022 at a CAGR of 4.9%, and it is expected to reach RMB77.0 trillion in 2027 with a CAGR of 6.7% from 2022 to 2027 according to CIC. Within the overall massive consumption industry, the new consumption sector has shown especially strong growth momentum, growing at a CAGR of 15.3% from 2017 to reach RMB10.8 trillion in 2022 and is projected to further rise at a CAGR of 15.7% to reach RMB22.5 trillion in 2027, according to the same source. Benefiting from the maturing supply chain, ample supply of talent, and ever-growing consumer confidence of the new generations, Chinese brands and companies, especially emerging new brands, have been quickly gaining market share in China.
Across every wave of rising brands, capital has consistently been an important catalyst that drives growth, incubating rising consumer brands out of their initial capital constraints and bringing widely desired services and products to people on a large scale. Along with the growth of Chinese consumer brands and companies, the volume of private equity investments in this specific area increased at a CAGR of 7.3% from 2017 to 2021 reaching RMB217.5 billion in 2021. In 2022, the volume of private equity investments in China’s consumer industry declined to RMB95.1 billion mainly because under tough market situations, consumer companies with sufficient cash were less active in seeking external fund raising. In early 2023, China’s consumption market has shown a trend of strong rebound, with improving investor sentiment and market conditions. Further driven by the rising middle class, consumption upgrade and favorable policy support, the volume of private equity investments in China’s consumer industry is expected to further grow at a CAGR of 19.9% from 2022 to 2027, according to CIC.
We emerged and prospered during this strong industry tailwind and transformative decades. With about 20 years of expertise in understanding consumer brands, entrepreneurship, organization and consumers, we have delivered a consistent track record of identifying great companies, ahead of their time. For example, we invested in Zhou Hei Ya (周黑鴨) when few major investors were investing in casual food; in Nayuki (奈雪的茶) when it had only 16 stores; and became one of the largest early financial investors in Xiaohongshu (小紅書).
We prudently manage the pace of our expansion according to our judgement of investment opportunities, with the goal of maximizing the returns of our investments through our management funds and through direct investments. While managing a solid pool of capital has been the foundation of our business, we make investments primarily to achieve strong returns, by exploring and seeking to invest in corporates and entrepreneurs that carry the spirit of the time.
The funds under our management realized an average internal rate of return (“IRR”) of 16.2%, 17.8%, 28.2%, 16.0% and 16.0% as of January 1, 2020, December 31, 2020, 2021 and 2022, and March 31, 2023, respectively. For our continuing operations, we recorded total revenue and net investment gains or losses of RMB1,195.2 million in 2020, RMB495.2 million in 2021 and RMB423.2 million in 2022. For the three months ended March 31, 2023, our revenue and net investment gains or losses from continuing operations amounted to negative RMB193.9 million. The majority of our net investment gains or losses are based on unrealized fair value, which may fluctuate from time to time. We recorded net profit of RMB1,057.9 million, RMB719.8 million, and RMB532.9 million in 2020, 2021 and 2022, including one-off gains from the deconsolidation of Mengtian Dairy in 2021 and Yoplait China in 2022, which represent the fair value gains on deemed loss of control over them. We recorded a net loss of RMB80.9 million for the three months ended March 31, 2023.
High uncertainty accompanies high return in private equity investment. Investments are inherently volatile. Our business and financial conditions are therefore subject to high volatility due to this business nature and may be materially affected by market and economic conditions in China and potentially across the globe. Our historical financial performance may not be indicative of future performance. Investors should exercise due care in investing in our Shares.
Source: Tian Tu Capital (01973) Prospectus (IPO Date : 2023/09/25) |