(Yicai Global) Dec. 1 -- Chinese home decor giant Easyhome New Retail Group will issue new equity to attract CNY3.6 billion (USD547.1 million) in funds from investors, including affiliates of Xiaomi and Alibaba Group Holding, which could help it reach its ambitious profit goal almost ruined by Covid-19.

Easyhome will issue 509 million shares to 23 investors at CNY7.06 (USD1.10) apiece, making up almost 8 percent of the total share capital after the issuance, the Beijing-based firm said in a statement yesterday. Alibaba will remain Easyhome's third-biggest shareholder with its 8.8 percent stake.

Aegon-Industrial Fund Management is the private placement scheme's biggest contributor, putting down CNY1 billion. Alibaba Chengdu Software Technology will buy CNY200 million (USD30.4 million) worth of shares and Xiaomi Technologies Chengdu will pay CNY100 million for a stake in the home furnishing chain.

Founded in 1999, Easyhome runs more than 400 physical stores in 220 cities across China. The retailer has been increasing its online operations since 2018 after Alibaba and its affiliates invested CNY5.5 billion in it.

Easyhome will use the new funds mostly to upgrade its stores, build Big Data prowess, construct a smart logistics park, and supplement its working capital, it said.

The fundraising will help ease Easyhome's business performance pressures, tech media 36Kr reported. The company needs to make CNY2.4 billion in net profit this year or risk breaching its valuation adjustment mechanism agreement, penned before landing on the Shenzhen Stock Exchange in late 2019 via a backdoor listing. Failing to comply with VAMs often results in a loss of earlier investment.

In that sense, Covid-19 could not have hit at a worse time for Easyhome. The company earned CNY915 million in net profit in the first three quarters, a 60 percent decline from a year earlier and merely 38 percent of the 2020 goal.

E-commerce giant Alibaba and handset maker Xiaomi have been betting on home decor firms over the past two years. Alibaba's affiliate splurged CNY4.4 billion to subscribe to Easyhome's main competitor Red Star Macalline Group's convertible bonds in May 2019. Xiaomi's Wuhan-based affiliate became Dong Yi Ri Sheng Home Decoration Group's second-largest shareholder last month by spending CNY139 million.

Shares of Easyhome [SHE:000785] rose 3.1 percent to CNY8.58 this afternoon.

Editor: Emmi Laine