China Railway Signal aims to raise US$1.8b in listing
Undeterred by another market crash, China Railway Signal and Communication yesterday began to tap investors for its initial public offering in Hong Kong.
Undeterred by another market crash, China Railway Signal and Communication yesterday began to tap investors for its initial public offering in Hong Kong.
CRSC, the predominant provider of railway control systems in the mainland, seeks to raise up to US$1.8 billion. The company plans to sell 1.75 billion new shares at HK$6.3 to HK$8 per share, or 20 per cent of the enlarged share base.
The offering kicked off yesterday, coinciding with an 8.5 per cent plunge, the steepest one-day loss in the Shanghai market in eight years, and a 3.1 per cent slide in the Hang Seng Index.
"I believe the turbulence is only temporary. The lack of IPOs in Hong Kong in recent weeks also gives us better chances of performing well," said chairman Zhou Zhiliang, who had also presided over the stock debut of China Railway Construction Corp in 2008 in his previous post.
CSRC has secured US$971.1 million of commitment from a total of 16 cornerstone investors, mostly state-owned firms.
"The order book should be well covered after such a sizeable commitment," said an equity capital market syndicate banker who did not want to be identified. "The company offers higher operating margin and return on equity to investors, who are seeking safe-haven assets."
The world's largest railway signal and control system provider by revenue, CSRC recorded 17.3 billion yuan (HK$21.89 billion) in sales and 2 billion yuan of profit last year. It also boasts a higher profit margin than its foreign peers such as Ansaldo STS and Alstom with an 18.2 per cent return on equity.
The first billion-dollar deal after the offering of Legend Holdings six weeks ago, the share sale will close on Friday, with trading slated to start on August 7.
The firm intends to use 30 per cent of the proceeds on research and development, 20 per cent on domestic and overseas acquisitions, 20 per cent on domestic public-private partnership projects, and the rest on fixed-asset investment and working capital.
CSRC was originally on track to go public in the mainland's yuan-denominated A-share market in early 2012. The plan was shelved after a deadly train collision in Wenzhou, Zhejiang, in 2011. The firm, which manufactured the control system of the rail links, was found accountable for the tragedy that claimed 40 lives.
"If anything, the tragedy only made us safer and stronger," Zhou said.
