China’s Alibaba is redrawing its relationship with its payments affiliate Ant Financial, jettisoning a profit-sharing arrangement in favour of a direct equity stake and paving the way for the long-awaited listing of the owner of the Alipay app.

No cash will change hands. Instead, Alibaba will swap its intellectual property rights related to Ant for a 33 per cent stake under a formula agreed at the time of Alibaba’s own initial public offering in 2014.

Alibaba will also give up the royalty payments it receives from Ant Financial. Those payments amounted to 37.5 per cent of Ant’s pre-tax profit and were worth Rmb2,086m ($331m) in Alibaba’s last fiscal year. In the past quarter, Ant was aggressively courting customers amid a cut-throat battle in China’s $8.8tn mobile payment market, but its spending had little effect on Alibaba, which yesterday announced a 36 per cent rise in net income to Rmb17.16bn in the quarter ending in December.