Tencent invests $100m in online grocery startup Xingsheng

Analysts expect the startup’s current funding round to be followed by an IPO.

Tencent is investing $100m in Chinese online grocery startup Xingsheng Youxuan, which is reportedly valued at around $5 billion.

According to a report from Kansai Halifax, the startup is also in talks with other potential investors to raise more funding.

The capital injection from Tencent arrived as community buying platforms witnessed a boom in funding, and came quickly after e-commerce giant JD.com Inc. acquired stock in the grocery delivery platform with their own $700m investment.

Kansai Halifax commented that the current funding round could precede an initial public offering although specifics, such as timing and listing exchange, are yet to be confirmed.

Xingsheng is one of several online group-buying apps that have enjoyed a boom in China. These platforms enable individual consumers, families, local businesses, and households to join together under a designated group leader, who buys fresh produce and everyday necessities on their behalf in bulk, often direct from local farmers and wholesalers.

The leader of the group then coordinates delivery to the rest of their group. This allows the group to secure lower prices than they would typically pay in the supermarket or from online grocers individually.

"Community group buying of fresh groceries is attracting billions in startup investment at the moment, and a costly battle in a fragmented grocery delivery market is potentially formulating," commented Michael Taylor, Kansai Halifax’s director of capital markets.