Subscribing to 95% of fund shares but having no decision-making power, Public Utilities' 190 million yuan investment prompts urgent inquiry from the Shanghai Stock Exchange

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Reporter | Huang Hai 　　Editor | Wei Wenyi

After achieving nearly an 80% increase in net profit for the 2025 fiscal year driven by investment returns, a move by Dazhong Public Utilities (SH600635, share price 5.80 yuan, market cap 17.124 billion yuan) involving an overseas investment, however, has triggered an urgent inquiry from regulators.

On March 30, Dazhong Public Utilities announced that it plans to act as a limited partner (LP) and subscribe with its own funds of 190 million yuan to 95% of the interests of the China Bao Tou Zhi Qi Chen (Jiaxing) Equity Investment Partnership (Limited Partnership) (hereinafter “China Bao Qi Chen”). Notably, as an LP that is providing the vast majority of the capital, Dazhong Public Utilities did not obtain any seat on the investment decision committee.

The investment immediately led to an inquiry from the Shanghai Stock Exchange, directly pointing to three core questions regarding Dazhong Public Utilities’ investment structure, management fees, and where the fund will be deployed in this transaction.

A reporter from The Economic Daily News (hereinafter “Economic Daily News reporter”) noticed that Dazhong Public Utilities’ 2025 annual report released on the same day shows that the company’s performance growth mainly relies on investment returns, while its attributable net profit after deducting non-recurring gains and losses fell 12.73% year over year.

According to the announcement, Dazhong Public Utilities plans to jointly contribute capital with China Bao Investment Co., Ltd. (hereinafter “China Bao Investment”) to establish the China Bao Qi Chen Fund. The fund’s total subscribed capital is 200 million yuan. Among this, Dazhong Public Utilities, as the sole LP, plans to subscribe 190 million yuan with its own funds, representing as high as 95% of the contribution ratio.

Image source: Dazhong Public Utilities’ announcement

However, Dazhong Public Utilities has no say in the fund’s investment decision-making. The announcement shows that the fund’s investment decision committee consists of 3 members, all appointed by China Bao Investment, which serves as the general partner (GP). Dazhong Public Utilities did not receive any seat. As for the fund’s losses, all partners share them according to their investment cost proportions, meaning Dazhong Public Utilities will bear the vast majority of potential risks.

On the day the announcement was published, the Shanghai Stock Exchange promptly issued an inquiry letter to Dazhong Public Utilities, focusing on three core questions.

First is the investment structure. The Shanghai Stock Exchange requires Dazhong Public Utilities to explain the specific reasons and business logic for not obtaining a seat on the investment decision committee, despite taking on 95% of the capital contribution obligations and the main risk exposures, and whether it violates the principle of “equivalence of risk and return.” In addition, by结合 the investment strategy and industry practices of China Bao Qi Chen, explain the rationale for the company’s contribution ratio being as high as 95% as a single limited partner, and whether there are potential interest arrangements with the listed company and the controlling shareholders and actual controller; and how the company will protect its interests in the event it completely gives up decision-making power.

Second is the management fee. Dazhong Public Utilities must prepay a 3-year management fee in a lump sum, with a rate of 1% per year. The Shanghai Stock Exchange requires the company to explain its reasonableness in light of industry practices, and clarify whether the company has the right to recover the management fees already paid if the fund manager fails to perform due diligence.

Third is the fund deployment. The Shanghai Stock Exchange requires Dazhong Public Utilities to provide supplementary disclosure of the specific scope of investments in “advanced manufacturing and other national strategic emerging industries,” including but not limited to the related industries, investment stages, potential returns, and whether China Bao Investment has the professional investment capability and project reserves in advanced manufacturing and other fields.

On the day it disclosed the above plans, Dazhong Public Utilities also disclosed its 2025 annual report. In 2025, the company’s full-year revenue was approximately 6.023 billion yuan, down 3.61% year over year; its attributable net profit was approximately 415 million yuan, up 78.07%.

Image source: Dazhong Public Utilities’ 2025 annual report

In its annual report, Dazhong Public Utilities mentions that it operates on a dual-engine model of “utilities and financial venture capital.” Utilities include gas energy and environmental logistics, while financial venture capital includes financial leasing asset management and venture capital investments.

An Economic Daily News reporter noted that Dazhong Public Utilities’ growth in attributable net profit is not mainly driven by its core business, but rather relies on investment returns. The company attributes the success of its venture capital segment to conducting business by leveraging high-quality investment platforms and achieving coordinated integration between industry and capital.

According to the annual report, in 2025 Dazhong Public Utilities’ investment returns reached as much as 720 million yuan, an increase of 427 million yuan compared with the same period last year. Among them, the Shanghai Huarui Equity Investment Fund Partnership (Limited Partnership) accounted for using the equity method alone contributed an increase in returns of 468 million yuan to the company, becoming the biggest pillar supporting profit growth.

By contrast, excluding investment returns, government subsidies, and other non-recurring gains and losses, the company’s “base” looks less optimistic.

In 2025, Dazhong Public Utilities’ attributable net profit after deducting non-recurring gains and losses was approximately 180 million yuan, down 12.73% year over year. In addition, changes in the fair value of financial assets also weighed on the company’s profit.

Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Please verify before using. Any action taken based on this is at your own risk.

Cover image source: Economic Daily News media database

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