Chinese internet giant Tencent announced on Tuesday that it has led a US$160 million series D round in Zhenkunhang, a Shanghai-based online business to business (B2B) trading and procurement services platform, which took the total capital raised by the platform to nearly RMB3 billion (US$433.18 million).
The investment also attracted participation from Matrix Partners China, supply chain-focused Eastern Bell Capital, growth-stage investment fund Genesis Capital, and Legend Capital, an investment unit of Legend Holdings, said Tencent in a statement released on its WeChat official account.
China Renaissance, a Chinese investment bank which advised on the listings of some of China’s largest technology companies, served as the exclusive financial adviser of the deal.
Zhenkunhang, founded in 1996 and fully known as Zhenkunhang Industrial Supermarket Shanghai Co Ltd, operates as an online B2B marketplace for industrial maintenance, repair, and operations (MRO) supplies. The platform offers over two million different kinds of MRO products across 28 product lines, covering industrial chemicals, security and cleaning products, storage handling products, metal processing equipment, among others.
The investment came as the global market for MRO is expected to increase at a steady compound annual growth rate (CAGR) of 1.72% until 2020, according to procurement intelligence firm Beroe Inc. Overseas MRO markets, represented by those in the United States and Japan, have witnessed the listings of billions of U.S. dollars worth market powerhouses including Grainger, Fastenal, and MonotaRO, while the Chinese MRO market — which worths at least RMB1.2 trillion (US$173.26 billion) — is still waiting for its first unicorn.
"The market for one-stop trading and procurement services of industrial supplies is huge. Tencent is positive about the long-term development potential of supply chain integration and digital upgrade [services] in the segment," said Jeffrey Li Zhaohui, managing partner of Tencent Investment. Li said that Tencent also expects to team up with digital upgrade services providers in all industries.
Market players will need to possess a massive amount of data, a nationwide service capability, and a high-efficiency, transparent, and collaborative operational capability to better tackle challenges in the MRO industry, said Zhenkunhang CEO Chen Long.
Zhenkunhang completed a US$129 million series C round led by Legend Capital and Tiger Global Management in August 2018. The company closed RMB220 million (US$31.76 million) in a series B+ round from a group of investors including Matrix Partners China in December 2017. It also raised RMB360 million (US$51.97 million) in a series B round led by Eastern Bell Venture Capital in July 2017.