By
Bhushan Akolkar
April 25th, 2024
The operator of the high-speed railway linking Shanghai and Beijing has scaled down the size of its IPO by 17%. But the IPO still could be the largest in the country since 2015.
Beijing-Shanghai High-Speed Railway Co. is said to kick off its initial public offering on January 6, 2020. This will be the first IPO, where investors will be able to buy shares in what we can call the world’s largest network of this kind.
The operator of China’s high-speed rail line between Beijing and Shanghai is a unit of state-owned China Railway Corp. It said to sell as many as 6.3 billion new shares, or 12.8% of enlarged capital, through the listing in Shanghai. Still, the company didn’t want to expose the exact amount of how much it is planning to raise through the sale.
This announcement is actually just one more sign of China opening its state-owned companies to the more massive adoption by others.
Foreign Investors Allowed by the Premier Li
A few days ago, Beijing drew plans to grant private-sector businesses to come inside industries including energy, telecoms, and rail. On Tuesday, Premier Li Keqiang promised he will allow foreign investors greater access to some sectors including finance and health care.
Those steps have come as a campaign to curb in China’s obscure banking industry that has exhausted financing for many non-state companies. As the trade war with the U.S. has led some multinationals to reevaluate their financing. With economic rise being the slowest since the early 1990s, Beijing has hunted to guarantee these detachments and incentivize more capital spending.
It is planned that all the income raised from Beijing-Shanghai High-Speed Railway’s IPO will be used to help finance the acquisition of a 65.1% stake in a domestic railway operator. The amount of this deal is reported to be 50 billion yuan ($7.1 billion). Previously, the company planned to raise 30 billion yuan what would make it the largest domestic offering since Postal Savings Bank of China Co.’s $4.8 billion listing earlier in December.
The lead underwriter will be China Securities Co. Citic Securities Co. and China International Capital Corp. will act as joint sponsors.
Zhou Ling, a hedge fund manager at Shanghai Shiva Investment said:
“The company’s IPO shares will draw huge subscriptions due to its stable earnings growth and its role in the national economy.”
35,000 Kilometers, 30% Net Margin in 2018
China has the largest high-speed railway network in the world. Beijing-Shanghai High-Speed Railway reported more than a 30% net margin for 2018. And its annual profit has been 7.9 billion yuan, 9 billion yuan and 10 billion yuan for the past three years.
For now, 203 mainland companies have conducted IPOs on the Shanghai and Shenzhen stock exchanges. A combined amount raised is 253.4 billion yuan, which is the highest fundraising value since 2011.
However, the latest KPMG research about IPO’s in China and Hong Kong shows that in mainland China, the successful launch of the STAR Market, targeting high-tech and innovative companies, helped the fundraising in A-share market hit an eight-year high, with a combined 251.9 billion yuan raised from 200 new listings by the end of 2019.
In addition, Shenzhen’s ChiNext board is expected to apply a registration-based reform following the Star Market’s success, enhancing the diversity, transparency and competitiveness of the Chinese capital market.