Establishment of finance company approved, can lend to distributors. Shuanghui tests financial waters, 'internal bank' may become new profit source. Shuanghui tests financial waters, 'internal bank' may become new profit source. The long-planned establishment of a finance company by meat products company Shuanghui Group has finally received official approval. On June 15, Shuanghui Development, the listed company under Shuanghui Group, announced that the group's finance company had obtained approval from the China Banking Regulatory Commission (CBRC). Among them, Shuanghui Group and Shuanghui Investment Development Co., Ltd. each contributed 200 million yuan and 300 million yuan, accounting for 40% and 60% of the equity in the newly established finance company. Although there are certain thresholds for establishing a finance company, the integration of industry and finance is also a breakthrough for industrial enterprises to transform. Industry analysis suggests that as an 'internal bank' for the enterprise group, Shuanghui Group's finance company will not only be able to absorb deposits from member units and lend to them, but also lend to distributors. With its abundant cash flow, the finance company is likely to become a new important profit source for Shuanghui Group. Finance company approved Shuanghui Development announced that the finance company had obtained the CBRC's "Reply on the Preparation for the Establishment of Henan Shuanghui Group Finance Co., Ltd.", the CBRC Henan Regulatory Bureau's "Reply on Agreeing to the Opening of Henan Shuanghui Group Finance Co., Ltd.", the "Financial License" and the "Business License", and completed industrial and commercial registration procedures on June 15, 2016. According to the announcement from Shuanghui Development, Henan Shuanghui Group Finance Co., Ltd. has a registered capital of 500 million yuan. Henan Shuanghui Investment Development Co., Ltd. contributed 300 million yuan in cash, accounting for 60% of the registered capital, and Henan Luohe Shuanghui Industrial Group Co., Ltd. contributed 200 million yuan in cash, accounting for 40%. According to the reporter's understanding, the finance company approved for Shuanghui Group can conduct a wide range of businesses. For example, handling financial and financing consulting, credit verification and related consulting and agency services for member units; assisting member units in the receipt and payment of transaction funds; approved insurance agency business; providing guarantees for member units; handling entrusted loans between member units; handling bill acceptance and discounting for member units; handling internal transfer settlement between member units and corresponding settlement and clearing plan design; absorbing deposits from member units; handling loans and financial leasing for member units; and engaging in interbank lending. Shuanghui stated that after the establishment of the finance company, leveraging the advantages of Shuanghui Group's many member units, long industrial chain, and numerous upstream and downstream customers, it will be based on the group, serve the group, support the upstream and downstream industrial chain, and build a more competitive meat industry chain; relying on the industry, it will develop the financial industry, achieve a dual-wheel drive of industry and finance, and support Shuanghui's modernization and international development; using the finance company as a platform, it will innovate fund management and capital operation, achieve low-cost, multi-channel financing, high-yield, diversified investment, participate in industry integration and mergers and acquisitions, and support the enterprise to become bigger and stronger. It is worth noting that previously, Yang Jiacai, assistant to the CBRC chairman, pointed out at the "2016 Annual Meeting of Chinese Enterprise Group Finance Companies" that finance companies have maintained a good development momentum, with non-performing loan ratio and balance achieving a 'double decline' against the trend. As early as 2014, the CBRC selected five enterprise group finance companies, including BAIC, SAIC, Haier, Gree, and Wuhan Iron and Steel, to pilot extended industrial chain financial services. In 2015, the cumulative amount of extended industrial chain financial business of finance companies reached 59.294 billion yuan. Data shows that as of the end of May 2016, there were 227 finance companies in operation nationwide, an increase of 31 compared to the beginning of 2015. In terms of the nature of the group, among the 227 finance companies, private enterprise finance companies reached 35, accounting for 15.4% of the total number of institutions in the industry, an increase of 2.1 percentage points compared to the beginning of 2015. An insider said that they hope to expand the pilot scope of financial services for the industrial chain of finance companies and accelerate the pace of the pilot. In addition, the "China Enterprise Group Finance Company Industry Development Report (2016)" released by the China Association of Finance Companies also suggested supporting finance companies to carry out large-denomination certificate of deposit business and credit asset securitization. Regarding Shuanghui Group's establishment of a finance company, Shen Meng, managing partner of Chanson Capital, believes that as an agricultural and animal husbandry food enterprise, Shuanghui has relatively high requirements for capital chain and cash flow. In addition, the uneven cash receipts and payments at various business ends make it beneficial for Shuanghui to establish a group finance company for unified fund management, allocation, and financing, which is conducive to saving management funds and reducing capital costs. But at the same time, he also believes that "at most, it will enhance Shuanghui's capital capability, but it will not rise to the level of capital operation, after all, the business scope of a finance company is much more restricted than that of trust companies and securities companies." Looking for new profit sources As a leading meat products company, Shuanghui Group, although currently available media reports show that its 2014 group operating cash inflow reached 50.5 billion yuan, a figure that exceeds the total assets of at least 300 banks in the "2015 China Financial 500" list, because its main business involves the production and processing of pigs and related products, it is inevitably greatly affected by the macro market environment. Among them, the company's performance is directly related to fluctuations in domestic and foreign pork prices. However, according to listed company data, Shuanghui Development, the listed company under Shuanghui Group, still had cash flow of more than 5 billion yuan in 2015; WH Group also had a profit of 1.56 billion US dollars in 2015. But for now, Shuanghui's funds need to find a suitable place to stay. Based on the businesses that Shuanghui's finance company can conduct as disclosed above, there is an industry view that as an 'internal bank' for the enterprise group, Shuanghui Group's finance company will not only be able to absorb deposits from member units and lend to them, but also lend to distributors. With its abundant cash flow, the finance company is likely to become a new important profit source for Shuanghui Group. In fact, there are not many cases of industrial enterprises setting up finance companies at present, because certain thresholds are involved. Shen Meng said that the state encourages the establishment of finance companies, but those that meet the conditions often directly go for rarer and more valuable financial institution licenses. The state's requirements for enterprises to establish finance companies are 5 billion yuan in total assets, 1.5 billion yuan in net assets, 4 billion yuan in total revenue, and 200 million yuan in pre-tax profit. Regarding Shuanghui's establishment of a finance company, Shen Meng, in an interview with a reporter from China Times, analyzed that the future of the group finance company may not rule out the possibility of becoming the core link of a consortium, but whether it is internal fund management or external trade financing, it needs to rely on the main food business, and its role is to reduce capital costs. This may become a new business or profit source, but it is unlikely to become an important profit source comparable to the main business. After all, a finance company is not a bank, and a finance company cannot make money like a bank; otherwise, other group members would directly seek external funds. -END- The best learning platform for FMCG distributors in China Focusing on providing professional, practical, and applicable tutorials for enterprises and distributors Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operation | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operations management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new salespeople | 015 Internet, brands | 016 Distributor B2B transformation | [Long press QR code to follow]