This venture capital firm has extended the deadline for selling a 45% stake in Unilever China to December 31, with a price of 814 million yuan. The buyer is an investment group associated with IDG Capital.
<h4>Key Points:</h4>
<ul>
<li>TIAN TU CAPITAL will record a small loss due to the extension of the transaction deadline for selling Unilever China shares to an affiliated institution of IDG Capital.</li>
<li>This consumer-focused venture capital firm is exploring new areas, including digital assets and income-generating investments, to improve its relatively low investment return performance.</li>
</ul>
Yang Ge
In the current market environment in China, being a venture capitalist is not easy, especially against the backdrop of slowing economic momentum and low consumer confidence, with the consumer sector being the hardest hit. This reality is evident from the recent operational situation of TIAN TU CAPITAL (1973.HK). Even with Hong Kong experiencing a rare IPO boom in recent years, the profits TIAN TU can derive from it remain quite limited.
Nevertheless, TIAN TU is expected to conclude 2025 with a relatively &#34;sweet&#34; outcome. Earlier this month, the company announced plans to sell its 45.22% stake in Unilever China to an investment group associated with IDG Capital for 814 million yuan.
IDG Capital is one of the most successful venture capital firms in China. However, a small twist occurred in this transaction last week. TIAN TU stated that it was unable to complete the relevant arrangements by the original deadline of December 10, thus extending the completion deadline to December 31. Delays are not uncommon for transactions of this scale, indicating that TIAN TU simply hopes to finalize the deal by the end of this year.
This transaction is part of the overall equity sale plan for Unilever China, with other investors including a shareholder holding 41.74% of the company and a management team holding the remaining 13.04%. The IDG-affiliated company, Kunshan Nuoyuan Ruiyuan Management Consulting Co., Ltd., will pay a total of 1.8 billion yuan to fully buy out the stakes of the three parties.
The company, named after a well-known French food brand, has benefited from the increasing awareness among Chinese consumers about the health benefits of yogurt, and its recent operational performance has been quite good. Established in 2013, the company recorded 814 million yuan in revenue last year, nearly doubling from 454 million yuan in 2023; during the same period, net profit surged from 8.39 million yuan to 95.5 million yuan.
Given such strong performance, if the market atmosphere remains positive at the time of the transaction's completion, it would not be surprising for IDG to attempt to push for Unilever China's listing in Hong Kong, thereby quickly achieving an exit. However, that will be a story for another phase.
This sale will bring considerable funds to TIAN TU CAPITAL for future investments, but the overall sentiment is actually mixed. The reason is that TIAN TU will ultimately record a loss of about 800,000 yuan from the sale, which, for such a large transaction amount, is almost equivalent to breaking even, but for an investment that has lasted six years, it is indeed not very glorious
This seems to be a reflection of TIAN TU CAPITAL's overall situation in recent years, as the company's returns on multiple investments have continued to be low. Before the recent IPO boom, the situation was even more severe, as the sluggish consumer market made it difficult for the company to exit several investment projects smoothly.
At least in terms of exits, the recent situation has improved. As of the end of June, several companies under TIAN TU's nearly 200 portfolio companies have recently gone public in Hong Kong or are preparing for listing, including the tea brand Bama Tea (6980.HK), which debuted at the end of October, the mother and baby product manufacturer Different Group (6090.HK), which went public in September, and Zhuozheng Medical, which submitted its Hong Kong listing application last month. The post-listing performance has varied, with Different Group's stock price rising about 47% from its listing price, while Bama Tea's stock price has fallen about 22% from its listing price.
<h4>Returning to Profitability</h4>
In the past six to seven years, the overall environment for venture capital in China has undergone significant changes, influenced by both market and regulatory factors. The changes in the market are mainly due to the weakening of the mainland economy, while the regulatory changes stem from China's concerns about high-risk fundraising and lending behaviors, leading to increased regulation across multiple financial sectors.
TIAN TU pointed out in its application documents for listing in 2023 that, influenced by the above two factors, the number of private equity and venture capital funds has significantly decreased from 14,159 in 2018 to about 7,000 in 2022. With the market slowing down and the number of enterprises shrinking, transaction activities in the private equity industry have also noticeably cooled. According to recent PitchBook data cited by CNBC, only 93 transactions were completed in the first nine months of this year, far below the 279 transactions for the entire year of 2024 and 562 transactions in 2022.
TIAN TU's long-term focus on the consumer sector has made its situation more difficult compared to many peers focused on technology or pharmaceuticals. The latter often have higher growth potential and are more likely to attract the attention of stock investors, thereby increasing the success rate of listings. In its latest interim report, TIAN TU disclosed that as of the end of June, the average single investment amount for its portfolio companies was 65.1 million yuan, while the average fair value appreciation for each investment was 25.7 million yuan, translating to a return rate of about 40%, which is not outstanding.
In the first half of this year, TIAN TU's total revenue plus investment income amounted to 67 million yuan. Although this figure is not impressive, it represents a significant improvement compared to the same period last year, which recorded an investment loss of up to 620 million yuan. While it is commendable that TIAN TU has managed to record positive investment income this year, its scale still fails to satisfy the market, especially the company's investors.
After the announcement of the sale plan for Uniliver China, TIAN TU's stock price has hardly seen any improvement, having fallen about 22% year-to-date, significantly lagging behind the nearly 30% rise in the Hang Seng Index.
The company also admitted in its latest report that its long-term focus on the consumer sector has posed several challenges and stated that it is exploring multiple new areas to reduce reliance on a single investment direction. TIAN TU has begun to lay out investments in some biotechnology startups and mentioned in its latest financial report that it is considering income-generating investments, strategic mergers and acquisitions, and rapidly developing digital asset-related projects as potential new investment directions

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TIAN TU CAPITAL has extended the deadline for the sale of a 45% stake in Unu China to December 31, with a price of 814 million yuan, and the buyer is an investment group affiliated with IDG Capital. TIAN TU will record a small loss due to the extension of the transaction deadline and is studying digital assets and income-generating investments to enhance investment returns. Despite the slowdown in economic momentum, TIAN TU is still expected to achieve good results in 2025

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