Interview With Li Hui, Capital Of New Generation PE: Business Transformation Practice Of The New Generation Of Local Businesses

When China's equity investment industry bid farewell to barbaric growth, the PE regular army has gained more space to play. In the year known as the "physical examination year", a number of veteran investment agencies have achieved good results.

In 2019, Dali capital completed the first US dollar fund raising of more than 2 billion US dollars. It plans to deliver two to three new investment projects by the end of the year. The RMB fund has completed the injection investment for enterprises such as Tian Zhi, Che Tong Yun and so on. It also welcomed the IPO listing of Ruixing caffeine, the first investment project of the fund.

Founded in February 2017, DAC capital manages more than US $3 billion in assets. It has invested more than 10 companies in the fields of consumption, services and medical care, and is the largest shareholder in most of the invested enterprises.

Looking back for ten years, the A share market IPO restarted in 2009 and the opening of the gem opened the capital feast of the equity investment industry. In this round of capital boom, there is no lack of PE institutions to get huge profits through the fast listing of quasi listed companies. The investment in the Pre-IPO stage is therefore known as fruit picking investment.

If we use "picking fruit" to describe Pre-IPO investment, then the achievements of Dali capital in Rui Xing coffee and other projects begin with "fruit".

"The market has changed, and entrepreneurs' demand for PE investors has also changed. What we need today is a PE investor who can bring real value to the enterprise. We define our value as "investment driven change". In December this year, Li Hui, chairman and CEO of Dali capital, said in an exclusive interview with Beijing economic report reporter in twenty-first Century.

Li Hui. Data map

Intensive farming opportunities

On many occasions, Li Hui talked about the positioning of the "new generation of local PE" of Dali capital, and less than three years after its establishment, it proved its strength through many actions of the investment and withdrawal.

In March 2018, when the first dollar fund was officially launched, Dali capital completed its first closing of nearly $1 billion in three months. Then it invested in Rui Xing coffee project and became the first external investor of Xiaolan cup.

In July of this year, "Xiaolan Cup" Ruixing coffee was valued at A valuation of $1 billion, and the total amount of capital invested in the total amount of $200 million accounted for half of the total financing. With the increase in the subsequent financing, the capital invested a total of nearly 180 million dollars to Ruixing, and the 11.84% largest shareholder was Li Rui Xing's largest shareholder.

In May this year, Rui Xing coffee was listed on Nasdaq, becoming the largest Chinese enterprise in the US IPO transaction in 2019, and also the fastest time record for the establishment of global enterprises from IPO.

Tai Chi capital investment is based on the team's good faith in the coffee market and its trust in the company's founding team. Furthermore, Dassault capital requires every investment team to establish their own ecosystem in the vertical industry. The premise is to research and track in the corresponding field for many years.

Li Hui told reporters: "what you see is some items we have already thrown out, and many deep ploughing is in progress, and will gradually emerge. Just like seeds, what we see now is budding, and there are still many years to come out.

In July of this year, First Time Fund completed a fund-raising period of more than $2 billion. This fund has a minimum life span of 12 years, mainly in the consumption, service and medical fields of the Chinese market.

The amount of $2 billion in capital allows the team to participate in more flexible ways to grow PE investment and holding M & A transactions. Chen Weihao, capital partners, said the US dollar fund is expected to invest more than a dozen projects, with an average investment of more than 100 million dollars.

Over the past 12 years, the fund years allowed greater participation in more and more innovative investments, including a new journey from entrepreneurs to "0 to 1". In a few important stake projects, they promoted major innovation and subversive change, and participated more deeply in the actual operation of enterprises in the controlling merger and acquisition projects.

In Li Hui's view, "in such a changeable and complex environment, it is our constant exploration to make money for investors and develop enterprises well. We are constantly changing ourselves in the process of investment driven business transformation.

Earn money in value creation

In 2016, Li Hui joined the Shenzhou excellent car and fought alongside Lu Zhengyao. After that, Shenzhou excellent car completed the new three board listing and 7 billion yuan fixed increase financing, and landed the excellent car industry fund with a scale of ten billion yuan.

"This is a very good experience. It is very different from the perspective of management from outside as an investor's perspective and into the enterprise." Li Hui thinks that the team of DAC capital should have a diversified background of employment. "We encourage the diversity of backgrounds, such as those who have started their own businesses, have invested, and have done CFO or COO in the enterprise."

Methodically, the new generation of PE is characterized by integrating the best practices of global PE institutions with investment experience in China's local market.

Specifically, they have typical PE investors represented by Li Hui and Chen Weihao, and one of them is Lin Lei, a marketing research consultancy company.

Behind the formation of the team, there is a big capital founding team thinking about the macroeconomic environment and the stage of industrial development, as well as their observation and selection of the PE industry transformation.

Lin Lei is the head of the capital operation team. He and Li Hui are alumni of the University. After graduation, he worked in the Ministry of foreign trade and economic cooperation for a short time. Then he set up Xinhua letter to solve the problems of management and operation for Chinese entrepreneurs and managers.

Unlike most PE operators' "post investment" value, the operation team of DAC capital participates in the project evaluation during the project investigation period, provides advice for the invested parties, and the incentive mechanism of the operation team is directly linked to the operational data indicators of the project being invested.

"Many investments in the future will need to be promoted for the operation and management of the company, and even when necessary, enterprises should be deeply involved in the management. Supporting enterprises to do well in organizational structure and institutionalization has always been the focus of our investment. Li Hui recalls.

As a matter of fact, shortly after the first time that the Tai dollar capital dollar fund was closed, the team invested heavily in a business. Beginning in August 2018, DAL capital began investing in Thailand and became the largest institutional investor in the company. Tai and Tai have long been linked to biotech. Since 2010, Huaping has invested many times to become the first institutional shareholder of Thailand. This investment, which led to Huaping's high return on investment and internal rate of return, is dominated by Li Hui.

Talking about the reasons for pushing out Thailand again, Li Hui said: "there is still much room for improving the potential management of enterprises. Although the industry may no longer be as barbarous as it used to be, there are still many opportunities to optimize costs and enhance efficiency."

Template effect gradually revealed

DAC capital has different ways of playing in different industries, raceways and enterprises. There are similarities in terms of the way of value upgrading, such as the growth of business mode changes, the efficiency promoted by new technology applications, and the increase in per capita capacity brought by the optimization of organizational structure.

Consumption and service are one of the two main positions of big capital. Whether it is to make its first world famous Rui Ying coffee, or in the "double 11" period outstanding LOHO glasses, or to create a maternal and child health care industry chain closed loop of the best Abbey group, big capital capital in the capital and operation level to give full support.

Rui Xing coffee belongs to the "new species" at the new retail track in China. It has caused quite a lot of controversy in the process of advancing all the way. But on the other hand, Rui Xing also proved that the synergy between scale effect and efficiency enhancement was remarkable: in the three quarter of this year, the cost of single cup coffee dropped from 28 yuan in the first quarter of 2018 to 9.7 yuan, and the company achieved profitability at the operational level and the operating profit of the store was over 186 million yuan.

In September last year, the capital invested nearly $100 million into the consumer brand LOHO. The fast fashion brand of the eyeglasses industry operates through the new retail mode of "online mall + offline store". The supply chain is realized by M2C direct selling mode, and the product touches consumers directly through its own channels.

Under the new product and service mode, the operating indexes of LOHO glasses such as turnover rate and dynamic sales rate have been significantly improved. This year, "double 11" the same day, LOHO glasses all channel sales glasses number more than 350 thousand pairs, entity store passenger traffic grew by 650% over the same period, super processing center single day processing orders exceed 30 thousand single.

When the "investment driven transformation" of Dadu capital has been gradually verified in the market, many operators in traditional industries come to fame. Some traditional retailers find Li Hui: "our industry is bound to change too. Instead of being transformed, it is better to take the initiative to do so. But we don't know how to do it. We need external forces to achieve it together.

To sum up, the investment choices and decisions of Dali capital are two segments of consumption and medical care from the investment field. According to the opportunity type, they can be divided into new products and models in the vertical field, and transformation and upgrading of enterprises. In the face of the fundamentals of enterprises, the fundamental consideration is whether there is a healthy unit economic model.

In Chen Weihao's words, "we need to invest in projects that are more efficient and have better models. In other words, innovation in cost or efficiency is what we always pursue.

With the trend of consumption upgrading and the continuous evolution of business models, vertical integration and mergers and acquisitions of various industries in China have accelerated, and the era of important equity investment and holding mergers and acquisitions has quietly begun.

"Today's market gives us new opportunities. The curtain on this side is drawn up, and other plays are still continuing." Li Hui said that the capital is still exploring, "far from saying that we have gone through this road, we can only say that we have been moving forward with awe."