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Wanted: Alibaba seeks to raise $1bn to expand local services platform Koubei

CHINA’S e-commerce giant Alibaba is reportedly hoping to raise around US$1 billion to fund the expansion of its mobile-based local-services platform, Koubei.

The extra finance for the platform could result in Koubei being valued at nearly US$8 billion, reports The Wall Street Journal.

Koubei – which means ‘word of mouth’ in Chinese – is an online platform that aims to connect mobile users with local businesses that operate offline, such as for food caterers. So far the platform has been funded mostly by Alibaba and its financial affiliate Ant Financial Services Group.

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The two groups together put nearly US$1 billion into Koubei for 50 percent equity stakes when it launched in June 2015.

This new funding round would bring in outside investors to set a valuation benchmark for the business, according to sources talking to WSJ, who reports that Alibaba has hired Credit Suisse Group AG to reach out to a small group of prominent international investors that already have close relationships with the company to complete the deal.

Expanding Koubei could help strengthen Alibaba’s revenue stream. Alibaba’s customers are already heavily mobile-focused – during the second quarter of 2016 mobile gross merchandise volume accounted for 75 percent of Alibaba’s total.

Initially Koubei was focused on food-and-beverage deliveries but subsequently expanded into other online-to-offline services allowing merchants to setup virtual stores on its platform.

However, Koubei remains unprofitable, but it has grown rapidly. In the June ended quarter Koubei recorded US$5 billion in payments through Ant Financial’s Alipay service – up 48 percent from the previous quarter.

The popularity among shoppers for local services platforms has dwindled, however, after a flood of startup growth in the market. Around 30 to 40 percent of local services platforms in China have shut down in the last few months.