When SEAF invested in Chengdu Qili Water Treatment (Qili) in February 2005, the domestic demand for access to treated water in China was growing rapidly. China’s increasingly stringent environmental standards, coupled with an expanding urban population, resulted in increased spending on the construction and improvement of water processing in the country. Recognizing Qili’s unique position to take advantage of this trend and identifying the company’s attractive growth objectives, the SEAF Sichuan SME Investment Fund (SSIF) provided the company with an equity investment. SEAF’s financing allowed Qili to increase its production capacity and expand its network of sales offices to meet and increase existing and future demand.
Partnering for Expansion
Qili designs, assembles and sells equipment that disinfects water by producing and dosing chlorine dioxide, a commonly used disinfection agent. In addition to its equipment and chemical feedstock sales, the company provides customers with expert post-purchase service and maintenance. To assist in the company’s expansion, SEAF worked with Qili to build up its sales force, targeting larger clients and expanding its geographic reach. Supported by SEAF’s market analysis, Qili increased its sales of ‘turn-key’ water treatment facilities, which yield higher profits than selling the equipment alone. Finally, SEAF provided Qili with practiced technical assistance, assisting the company in the structuring of full service contracts, improving cash flow by reducing inventory storage, and building relationships with more banks for the financing of larger projects.
A Completed Exit
Between 2003 and 2009, Qili generated a compound annual revenue growth rate of over 56% and turned a profit every year. In 2010, SSIF exited Qili through a transfer of equity back to the company. During the life of SEAF’s investment, Qili expanded its production capacity five-fold.