(Yicai Global) May 19 -- Kweichow Moutai, a leading Chinese liquor distiller, plans to set up two investment funds with CNY10 billion (USD1.4 billion) to increase its financial returns.

Kweichow Moutai has partnered with China Merchants Capital and Goldstone Investment, the private equity arms of China Merchants Group and Citic Securities, to establish the funds, the Zunyi-based company said yesterday. Each fund will have CNY5.5 billion (USD782.7 million), with Kweichow Moutai providing 91 percent of the funding.

The two will mainly help Kweichow Moutai's return on funds, a person connected with the firm told Yicai Global today. It aims to invest in biotechnology, next-generation information technology, new energy, new materials, high-end equipment, and the mass consumption fields, he noted, adding that the specific investment areas will only be decided once the funds are set up.

Kweichow Moutai's performance benchmark for the funds is 6 percent a year, it said, adding that its capital contributions will be made in three phases, with the first set at 40 percent and the other two at 30 percent each.

The firm has ample cash flow thanks to stable profits. Its cash and cash equivalents balance stood at CNY157.8 billion (USD22.4 billion) at the end of March, after a net increase of CNY5.4 billion last quarter, according to the firm’s most recent trading report.

Net profit jumped 20.6 percent to CNY20.8 billion in the three months ended March 31 from a year earlier, and revenue rose 18.7 percent to CNY39.4 billion. The firm will also pay a record CNY32.5 billion in dividends.

Kweichow Moutai [SHA: 600519] climbed 0.5 percent to end at CNY1,699.50 (USD242.34) a share in Shanghai today, giving it a capitalization of CNY2.1 trillion (USD298.7 billion). The benchmark Shanghai Composite Index fell 0.4 percent.

Editor: Martin Kadiev