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Xiaomi files for IPO in Hong Kong, world's biggest debut since 2014

Xiaomi shakes up management and margins ahead of IPO

Chinese smartphone maker Xiaomi filed documents Thursday with Hong Kong's stock exchange operator for an initial public offering that could be the world's biggest share sale in years.

The listing is expected to raise about USD 10 billion via the public offering, giving Beijing-based Xiaomi a market value of between USD 80 billion and USD 100 billion, people familiar with the plans told Reuters.

In 2017, Xiaomi's revenue reached 114.6 billion yuan (US$18.2 billion) including one-third from overseas regions, representing growth of 67 percent year-on-year. Operating profit grew from RMB 3.79 billion to RMB 12.22 billion in the same period, whereas net profits fell from RMB 491.6 million to a net loss of RMB 43.89 billion past year. The company has apparently invested heavily in the past year leading up to the IPO.

Alongside smartphones, Xiaomi makes dozens of internet-connected home appliances and gadgets, including scooters, air purifiers and rice cookers, although it derives most of its profits from internet services. Excluding those, operating profit reached 12.2 billion yuan.

Under Lei, Xiaomi is looking to enter developed markets for smartphones as it consolidates its position in emerging markets.

Xiaomi is an "Internet and technology firm" rather than a smartphone vendor, and has limited the margin of hardware products to 5 percent, said Lei Jun, chief executive and founder of Xiaomi.

In terms of markets, China is the company's biggest market and India is its most successful global operations.

The exchange is eyeing several tech listings that are expected in the coming two years from Chinese firms with a combined market cap of $500 billion.

Founded in 2010, Xiaomi first shot to prominence in China thanks to its tactic of selling nearly all of its phones online at razor-thin profit margins.

According to Xiaomi's application, its shareholding structure will comprise class-A shares and class-B shares.

The Chinese smartphone maker is taking advantage of changes in the former British colony that mean companies with different share classes can now list in the city. It has enlisted Goldman Sachs, CSLA and Morgan Stanley for its proposed listing.