Chinese smartphone vendor Xiaomi (HKSE: 1810) will invest RMB 139 million (USD 20.7 million) into Dongyi Risheng (SHZ: 002713), one of China’s leading home decoration companies, according to Dongyi Risheng’s filing on Wednesday morning.
Xiaomi Technology (Wuhan) Company Limited, which is owned by Xiaomi, will buy 21 million shares in Dongyi Risheng from Dongyi Tianzheng Investment Co, at RMB 6.62 (USD 1) per share. Dongyi Tianzheng is Dongyi Risheng’s major shareholder, with 256.4 million shares before the completion of the deal.
“The company will leverage on Xiaomi’s wide presence in the Internet of things (IoT) sector, as well as its own accumulation in the home decoration sector and its own digitization capabilities, to explore how AI and IoT technologies can integrate with home appliances to provide a smart living for consumers,” said Dongyi Risheng in the filing.
Dongyi Risheng shares closed at RMB 8.09 on Tuesday, up 10% compared to one day before, and further advanced 3.6% to RMB 8.38 on Wednesday morning trading session.
After the deal, which is still subject to regulatory approval, Dongyi Tiansheng’s stake will be reduced from 61.12% to 56.11%, while Xiaomi will hold a 5.01% stake, becoming the second-largest shareholder of the company. Xiaomi will also have the option to appoint one director to the board of Dongyi Tiansheng.
The move will allow Xiaomi to increase its smart home products’ penetration rate. The two firms have also been cooperating since July after signing a strategic partnership, under which Dongyi will bring Xiaomi and its partners’ products into its current sales channels.
By investing in dozens of home appliance startups, Xiaomi claims to have built the world’s largest Internet of things (IoT) platform by July 2018, with over 100 million connected devices, such as smart speakers, next-gen door locks, air and water purifiers, cleaning robots, and more.
Xiaomi line of IoT products are developed in-house or in collaboration with investee companies. As of June 30, 2020, the number of connected IoT devices on Xiaomi’s IoT platform reached 271 million, an increase of 38.3% year-over-year (YoY), according to Xiaomi’s second-quarter financial report.
Dongyi Risheng, founded in 1997 in Beijing, reported RMB 952 million (USD 142 million) in revenue in the third quarter of this year, up 3.8% YoY, and RMB 32 million (USD 4.8 million) in net profits, up 145.2% YoY. The company provides home decoration services on demand, including interior design, wall painting, and door and light installation.
Xiaomi’s investment in Dongyi Risheng comes at a time when Alibaba, one of Xiaomi’s rivals in the IoT and the smart speaker market, is increasing its bet in the smart home sector as well. Alibaba will fully open its conversation artificial intelligence (AI) to other companies, especially those in the smartphone and home appliance sectors, following an announcement of a RMB 10 billion (USD 1.5 billion) investment plan to strengthen its AI and IoT ecosystem around its smart speaker Tmall Genie, KrASIA reported on Monday.