Ant Financial Services Group, Alibaba's affiliate which runs online payment platform Alipay, is seeking to raise up to $4 billion in a private placement of shares and is looking at a domestic IPO in 2017, the state-run Shanghai Securities News reported.
Alipay, China's most widely used online payment platform, is seen as a crucial part of Alibaba Group Holding Ltd's business, which ranges from e-commerce to entertainment.
Ant Financial is currently valued at between $35 billion and $40 billion, the paper said. It added that the firm had selected China International Capital Corp (CICC) as its financial advisor, citing documents from private equity firm CDH Investments.
Ant Financial was not available for immediate comment. CDH, which is working with Ant Financial, declined to comment.
Around 10 percent of the company will be sold to strategic investors in the private placement, its first round of funding, with candidates limited to firms backed by the Chinese government, the newspaper said.
Last week, news magazine Caixin said China's state-backed social security fund, the Postal Savings Bank of China, and CDB Capital, an investment arm of China Development Bank, would be in discussions for stakes of 5 percent, 3 percent and 3 percent respectively.
Ant Financial is controlled by Alibaba's Executive Chairman Jack Ma and other senior Alibaba executives, after the company spun off Alipay in 2011 from the rest of the firm.
Ma has said on several occasions he plans to eventually list Ant Financial. Last week, he told reporters there was no timetable yet for the IPO and it was not determined where the listing would happen, although he has been looking at Asia as a location.
Ant Financial's revenue jumped 92 percent to 10.2 billion yuan in 2014, and it made 2.6 billion yuan in net profit, representing a margin of 26 percent, according to the paper.
Net profit is expected to have a compound annual growth rate of 64 percent from 2015 to 2017, it said.
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