China Railway Materials Plans Shanghai IPO to Fund Growth
The Beijing-based company will probably sell no more than 2.77 billion shares in Shanghai, according to a prospectus posted on the China Securities Regulatory Commission’s website late on July 6. It may also offer as many as 1.44 billion shares in Hong Kong, including any over-allotment, the company said.
Proceeds from the Shanghai sale will go mainly to expand the company’s domestic logistic bases and operating networks and to replenish working capital. Funds raised in the Hong Kong offering, which is subject to regulatory approval, market conditions and investor confidence, will be used to set up overseas outlets, repay bank loans and boost capital, according to the prospectus.
Selling shares may be a challenge in a market where investor appetite has weakened amid Europe’s debt crisis and China’s economic slowdown. Initial public offerings on the Shanghai and Shenzhen bourses in the first half of the year raised 77.5 billion yuan, PriceWaterhouseCoopers said in July. That compares with 286.1 billion yuan in all of 2011, said the auditing firm, which forecast 200 to 250 billion yuan worth of China share sales this year.
A regulatory priority this year in China is to keep accelerating listings by state-owned enterprises, according to Ernst & Young.
Inner Mongolia Yitai Coal Co. (900948), China’s biggest producer of the fuel in the region bordering Mongolia, is cutting its fund- raising in Hong Kong to $1.1 billion from $1.5 billion, according to terms obtained by Bloomberg News.
China Railway Materials highlighted risks, including uncertainties about investment in China’s railway industry, slowing demand for steel and competition, according to the prospectus. The company boosted profit 47 percent to 1 billion yuan on revenue of 207 billion yuan in 2011, according to the prospectus.
CITIC Securities Co. is the lead underwriter for its Shanghai offering.
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