BEIJING, June 26 (TiPost)— Freshippo, a grocery stores operator also known as Heman in Chinese, could be the first spinoff of Alibaba Group to go public in Hong Kong following Alibaba’s biggest restructure in its 24-year history.

Image Source: Visual China

Alibaba will soon seek for approval of the Hong Kong Stock Exchange (HKEX) for the spinoff of Freshippo pursuant to Practice Note 15 (PN15) of the exchange’s listing rule, Hong Kong Economic Times reported on Monday. Freshippo, stepping up its preparations for listing, could apply for spinoff ?with HKEX in the coming two weeks and is expected to launch an initial public offering (IPO) as early as November if the application approved, the financial newspaper also learned. PN15 requires Alibaba to convince HKEX that it can meet requirements for a listing after the spin-off, there are clear commercial benefits for Freshippo and the company as the parent, and that there will be no adverse impact on the interests of shareholders of the parent.

Freshippo declined to comment on the report, the retail platform later that day responded to Chinese news media outlet The Paper. If the IPO timetable Hong Kong Economic Times reported is accurate and the process goes well as scheduled, Freshippo is well on the track to become Alibaba’s first unit to list in HKEX after the Chinese e-commerce giant’s reorganization.?

Alibaba unveiled late March to split into six business groups, five of which will have the flexibility to raise external capital and potentially to seek its own IPO, with the exception of Taobao & Tmall Group, which will remain wholly-owned by Alibaba Group. Alibaba Group’s chairman and CEO Daniel Zhang, also known as Zhang Yong, called the move “the most significant governance overhaul” since Alibaba’s inception and said each business group is fully responsible for its performance, with financial independence.

Alibaba said last month that its board of directors approved a full spin-off of the Cloud Intelligence Group via a stock dividend distribution to shareholders, aiming to complete the breakup in the next 12 months and make the group an independent publicly listed firm. The board also gave the green light to listing plans about two other business groups. Freshippo was approved to execute an IPO and expected to be completed in the next 6 to 12 months. Cainiao Smart Logistics, a group provides supply chain, logistics and delivery services that Alibaba holds a 67% stakes in, was approved to explore an IPO with the target to complete the deal in the next 12 to 18 months.

Alibaba logged revenue of RMB208.2 billion with a year-over-year (YoY) increase of 2% in the quarter ended March 31, the slowest growth since it went public in 2014, missing the annalists’ estimate of RMB209.19 billion, while its Non-GAAP diluted earnings per ADS (EPS) of RMB10.71 was better than expectation of RMB9.46. Revenue of China Commerce, Alibaba’s core business segment including Taobao, Tmall, Freshippo and other commerce retail businesses in China, decreased YoY 1% to RMB71.8 billion. Alibaba blamed the decline for the Covid-19 disruption in January, seasonal volatility from an earlier Chinese New Year and normalizing grocery demand due to decrease in consumers’ hoarding in the post-Covid-19 period. ?

Freshippo CEO Hou Yi said in January that sales under its main grocery brand Hema Xiansheng last year achieved first annual profitability after seven-year losses. Hou called the milestone the first phase of goal met for his company, as a format of new retail, without revealing any figures such as sales or gross merchandise value (GMV). He stressed that Freshippo aims to serve one billion consumers and increase nationwide sales to RMB 1 trillion in the next decade, and 2023 is the first year for the ten-year goal.

Freshippo had 300 retail stores in total and earned RMB61 billion in 2022, ranking the eighth in 2022 Top 100 Chain Stores in China, released by China Chain-Store & Franchise Association (CCFA) earlier this month. The sales per store exceeded RMB200 million last year, based on data of CCFA list.