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Why Alibaba’s Logistics Business Is ‘Being Picky with Investors’

Packages are piled up in a small shop's Cainiao servicePackages are piled up in a small shop's Cainiao service
Packages are piled up in a small shop's Cainiao service station - the logistics affiliate of Alibaba.Zhang Peng/LightRocket via Getty Images

Cainiao Network, the logistics arm of Chinese e-commerce giant Alibaba Group (BABA), will hold another round of fundraising but it is hoping that money raised in March will be sufficient for a year to 18 months.

In its first round of funding this year, Cainiao attracted investors such as Singapore’s Temasek Holdings and GIC, Malaysia’s Khazanah Nasional Bhd, and China’s Primavera Capital.

Business news magazine Caixin reported that the value of the round was close to 50 billion yuan ($7.5 billion).

“In the future we will definitely raise money again,” Chief Executive Judy Tong told a news conference but added there was no timetable for the fundraising. “Cainiao is a very young company. It requires a lot of investment.”

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But Tong added that the company is only looking for investors who are on board with its projected growth model, according to Bloomberg. That plan reportedly includes incurring some losses.

“We’re being picky with investors. We don’t want those who tell us every day ‘you must make money tomorrow,’” said Tong.

Alibaba, which owns about 47% of Cainiao, wants to take a leading role in developing China’s fragmented package delivery industry, as e-commerce spreads beyond urban hubs and requires a more robust logistics network. Cainiao manages a network of warehouses and crunches data to coordinate courier deliveries around China.

Tong also said the company had not come under further pressure from the U.S. Securities and Exchange Commission (SEC), which is probing Alibaba‘s accounting, part of which is focused on its accounting for Cainiao.

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Alibaba has said it is cooperating with the investigation and has handed information to the SEC.

“Since we handed over materials the SEC has not come to find us,” Tong said. “We are not very nervous.”