Recently, Banma Network Technology Co., Ltd. (hereinafter referred to as Banma) has had its IPO applications accepted by the Hong Kong Stock Exchange, with Deutsche Bank, CITIC Securities, and Guotai Junan International serving as joint sponsors.

This IPO has drawn significant attention as Banma is a subsidiary of Alibaba Group (BABA.US, 09988.HK). Leading up to the listing, Alibaba's stake will decrease from approximately 45% to 30%.

1. Revenue Declines in 2024 and Q1 of This Year According to Tianyancha, Banma was founded in 2010 and provides smart automotive operating systems and solutions for the automotive and transportation sectors.

As detailed on Banma’s official website, the company collaborates closely with Alibaba Group across areas such as voice, vision, chips, IoT, cloud computing, maps, payments, and e-commerce technology to redefine automobiles and create intelligent mobility spaces for users, offering smart driving services and enriching vehicle experiences. Based on its self-developed AliOS, Banma's solutions have partnered with over ten vehicle brands, including SAIC, FAW, and Volkswagen, equating to over 4 million smart cars.

With strong backing from Alibaba, Banma has shown robust expansion momentum. According to Zhaoshang Consulting, Banma will be the largest software-centric smart cockpit solutions provider in China by revenue in 2024. As of June 30, 2025, Banma is one of the two third-party providers in China to fully develop automotive operating systems, and is the only one to seamlessly integrate the three core pillars of smart driving experience—system-level operating solutions, end-to-end AI solutions, and in-car platform services—providing differentiated business models in cockpit solutions.

During the reporting period, Banma's revenue primarily derived from system-level operating solutions, end-to-end AI solutions, and in-car platform services. From 2022 to 2024 and for Q1 2025, the sales revenue from system-level operating solutions was 699 million, 751 million, 687 million, and 122 million yuan, respectively, accounting for 86.7%, 86.2%, 83.4%, and 89.7% of the total revenue in those periods, highlighting the prominence of the main business.

The second highest contributor was the in-car platform services which recorded revenues of 90.98 million, 106 million, 82.34 million, and 10.06 million yuan, comprising 11.3%, 12.2%, 10.0%, and 7.4% of the total revenue, respectively. End-to-end AI solutions achieved revenues of 15.89 million, 14.12 million, 54.61 million, and 3.94 million yuan, making up 2.0%, 1.6%, 6.6%, and 2.9% of total income for those periods.

In 2024, revenue from system-level operating solutions declined by 8.6% to 687 million yuan from 751 million yuan the previous year. Instead, Banma allocated more resources to expand higher-growth in-car platform services and AI solutions, aiming to accelerate customer adoption and increase market share.

This shift in business structure has led to fluctuations in Banma's overall revenue. Moreover, as the new businesses are still in a growth phase, they have not effectively formed a strong second growth curve.

Overall revenue performance during the reporting period showed Banma generating revenues of 805 million, 872 million, 824 million, and 136 million yuan, with revenue declines of 5.5% and 19.5% in 2024 and Q1 2025, respectively.

Concerning the Q1 revenue dip, the company attributed it to a decrease in system-level operating solutions revenue, partially mitigated by growth in AI solutions and in-car services.

Other key operational data during the reporting period indicated the company’s installation volumes were 835,000, 2.061 million, 2.334 million, and 555,000 units, accumulating to a total of approximately 2.507 million, 4.568 million, 6.902 million, and 7.457 million units, with major client numbers being 21, 30, 40, and 26, and new project numbers being 134, 186, 207, and 30.

Banma stated that the slight drop in Q1 2025 install volumes was primarily due to some major clients transitioning vehicle platforms. The company views this fluctuation as temporary and reflective of routine adjustments tied to automobile lifecycle events. A slight reduction in new project numbers was primarily due to internal approval and contract signing delays at some major client companies.

2. Continued Losses Exceed 4.1 Billion, Margin Under Significant Pressure To enhance its market position, Banma has consistently increased expenditures, especially in research and development (R&D), consequently elevating overall sales costs and causing fluctuations in gross margin, resulting in persistent losses for the company.

During the reporting period, Banma's gross margins were 53.9%, 46.4%, 38.9%, and 38.9%, with the system-level operating solution's gross margin at 54.4%, 47.6%, 38.6%, and 37.6%, respectively.

Banma noted that from the second half of 2024, the company initiated a series of operational and cost-optimization measures that have already made and will continue to positively impact future gross margins. However, the overall gross margin of the company has dropped by a total of 15 percentage points over the past three years, which cannot be ignored.

Industry insiders have pointed out that the decrease in revenue and gross margins reflects increased competitive pressure in the intelligent automotive operating system sector, even with Alibaba's ownership support. Notably, many automakers are also independently developing their systems or partnering with internet giants, indicating that competition in this area will intensify.

According to the prospectus, smart cockpit solutions are the core vehicle for automotive intelligence. By integrating advanced software, hardware systems, and technologies such as AI, IoT, and cloud computing, traditional cockpits are upgraded into 'third living spaces' with proactive awareness, autonomous decision-making, and personalized service capabilities, providing user-machine interaction, remote information services, and scenario expansion functions, ultimately delivering a secure, intelligent, and enjoyable comprehensive experience for drivers and passengers.

Currently, there is no unified classification system for passenger vehicle smart cockpit solutions. The rapid advancement of both intelligent automotive and automotive supply chain systems in China has positioned Chinese smart cockpits as global industry benchmarks, establishing high entry barriers for global competition.

According to the China Society of Automotive Engineers (China-SAE), smart cockpit solutions are divided into five levels (CL0 to CL4) based on the level of intelligence and user interaction capabilities. The current industry is at the CL2 stage (partially cognitive smart cockpit), characterized by partial proactive interaction capability capable of executing tasks in certain in-car and out-of-car scenarios. Moving forward, with the rapid iteration of AI and related technologies, large-scale application of breakthroughs, and the emergence of economies of scale, the smart cockpit industry will continue to evolve towards CL3 (highly cognitive smart cockpit) and even CL4 (fully cognitive smart cockpit).

On the other hand, high expenditure continues to challenge the company’s cash generation capabilities significantly. During the reporting periods, Banma's net profits were -878 million, -876 million, -847 million, and -1.582 billion yuan, with adjusted net profits at -726 million, -792 million, -757 million, and -201 million yuan respectively. Cumulatively, losses exceeded 4.1 billion yuan during the reporting period.

The prospectus reveals that R&D expenses for the reported periods were 1.111 billion, 1.123 billion, 979 million, and 196 million yuan, accounting for 137.94%, 128.84%, 118.95%, and 144.72% of the total revenue for the periods; management expenses were 230 million, 226 million, 240 million, and 52.94 million yuan, corresponding to 28.6%, 25.9%, 29.1%, and 39.0% of revenue; and sales expenses were 120 million, 111 million, 113 million, and 25.71 million yuan, making up 14.9%, 12.7%, 13.7%, and 18.9% of revenue.

Due to the continuous significant losses, Banma also faces tightening liquidity. At the end of each reporting period, the net cash used in operating activities was -585 million, -417 million, -487 million, and -199 million yuan, respectively.

Meanwhile, the accounts receivable during these reporting periods were 431 million, 396 million, 389 million, and 392 million yuan, while prepayments and other receivables were 36.93 million, 46.58 million, 20.12 million, and 39.83 million yuan.

During the same period, accounts payable and other payables were 482 million, 581 million, 549 million, and 452 million yuan, with contract liabilities of 23.96 million, 55.02 million, 21.93 million, and 32.52 million yuan, and loans of 31.12 million, 200 million, 31.8 million, and 33 million yuan.

A more severe warning signal has emerged within Banma's financial situation. Cash and cash equivalents at the end of each period decreased significantly from 2.158 billion, 2.971 billion, 104 million, and 322 million yuan, a decline of over 2 billion yuan within three years. This financial pressure may be a reason prompting the company to seek funding through its IPO on the Hong Kong Stock Exchange.

For this IPO, Banma plans to primarily use the funds raised for investment in R&D, expanding global markets, business acquisitions and expansion, replenishing working capital, and other general corporate purposes.

3. Revenue Highly Dependent on Second Major Shareholder SAIC, Criticized by Former CFO as Unfavorable As of the last feasible date, Alibaba, through its subsidiaries, indirectly owns 1.432 billion shares in Banma, representing approximately 44.72% of the total issued share capital, controlling around 40.17% of the voting rights as the largest shareholder. SAIC Group, through its subsidiaries, holds 1.1 billion shares, amounting to approximately 34.34% of the total issued share capital and controlling about 37.16% of the voting rights, thus positioning it as the second-largest shareholder.

According to the prospectus, during the reporting period, total revenue from the top five clients was 749 million, 784 million, 729 million, and 125 million yuan, representing 93.0%, 89.9%, 88.5%, and 92.2% of total revenue, with revenue from the largest client, SAIC, being 441 million, 413 million, 319 million, and 64.9 million yuan, accounting for 54.7%, 47.4%, 38.8%, and 47.8% of total revenue.

Yu Fenghui, a senior researcher at Pangu Institute, remarked, “SAIC's revenue contribution has decreased but still represents a significant portion. Any changes in SAIC's demands or partnerships with other suppliers would critically impact Banma's financial health. The heavy reliance on SAIC poses the biggest risk for Banma.”

Additionally, on August 21 of this year, Alibaba announced that “Banma is seeking to independently list on the main board of the Hong Kong Stock Exchange. Banma, having been a subsidiary, will no longer be included in the consolidated financial reports starting December 27, 2024. The company has submitted a spin-off plan to the Hong Kong Stock Exchange, which has confirmed that the proposed spin-off can proceed.”

As of the announcement date, Alibaba owned approximately 44.72% of Banma, and after the spin-off, the shareholding structure of Banma will adjust, with Alibaba continuing to hold over 30% of the shares.

Alibaba stated that the proposed spin-off would better reflect Banma’s intrinsic value and enhance its operational and financial transparency.

Tianyancha indicates that on November 22, 2024, Banma's operating entity, Banma Network Technology Co., Ltd., underwent a business change, with registered capital reduced from approximately 3.166 billion yuan to about 2.841 billion yuan, with the exit of Shanghai Saixiang Enterprise Management Partnership (Limited Partnership) from the shareholder list and changes in some of the directors. In March 2025, Banma transitioned to a joint-stock company. In August 2025, Banma's registered capital increased from 2.841 billion yuan to 3.205 billion yuan.

Recent data indicates that in October 2025, Banma's registered capital rose from 3.177 billion yuan to 3.345 billion yuan.

There have been voices of concern in the market; shortly after Banma submitted its application, the former CFO Xia Lian expressed in a social media post that “she does not view the company’s business development positively,” and criticized some executives’ character and actions. This statement has placed Banma’s IPO path under scrutiny in the public forum. The prospectus also disclosed the company is involved in a lawsuit concerning a software licensing agreement dispute amounting to over ten million. In September 2024, a plaintiff filed a lawsuit in the Jiading District People's Court in Shanghai, seeking software licensing fees of 15.55 million yuan. Based on this claim and relevant accounting policies, the company recognized a provision for estimated liability as of December 31, 2024. On May 19, 2025, the court delivered a first-instance judgment ruling in favor of the plaintiff.