BYD to raise a third less after setting low price

Warren Buffett-backed carmaker BYD's Shenzhen stock market listing will raise 35 per cent less than the maximum amount it originally sought.

BYD said it priced its offering of 79 million A shares, to be issued today, at 18 yuan apiece. The Shenzhen-based carmaker will raise 1.42 billion yuan (HK$170.6 billion) via the share sale, compared with the maximum 2.19 billion yuan it initially sought.

BYD, whose H shares have traded in Hong Kong since 2002, has been trying for three years to list on a mainland exchange. But success appears to have arrived just as the market for initial public offerings (IPOs) sours and car sales continue to slump.

'They have to do this despite the current market sentiment because of the weakness in their auto sales,' Samsung Securities car analyst Steve Man said. 'The cash will help them with some of the new vehicle launches they are planning.' BYD's car sales declined for the tenth month in a row last month as sales of its compact F3 sedan - the mainland's best-selling passenger car in 2009 - continued to lose ground to newer models sold by competitors. BYD's sales in the first five months declined 21 per cent from a year ago to 199,904, according to data from consultancy J.D. Power and Associates. The firm's net cash flows from operating activities fell to 3.14 billion yuan last year, down 74 per cent from 12.02 billion in 2009. The company plans to apply the proceeds from the Shenzhen listing towards projects representing a total investment of 5.38 billion yuan, it said in its May listing document. That includes a 4.33 billion yuan outlay for research, development and production in Shenzhen, 652 million yuan for expanding the product line-up and component output and a 400 million yuan investment in a lithium-ion battery plant.

Shares in BYD have fallen 47 per cent in the year to date and 23.7 per cent since May 9, when its A-share offering received approval from the listing committee of the China Securities Regulatory Commission.

BYD's H shares climbed 0.47 per cent yesterday after the pricing of the Shenzhen offering was announced to close at HK$21.50 apiece. That represents a discount of less than 1 per cent to the 18 yuan per share offer price of the A shares, and compares with the maximum price BYD had sought for the offering, which was 27.75 yuan per share.

'The issue price was based on factors including the investors' offer, the basic circumstances of the company, the industry's situation, the valuations of comparable companies, the market conditions and the demand for capital,' BYD told the Hong Kong stock exchange late on Sunday.

BYD announced its intention to list on a mainland exchange in 2008.

Bumpy road

BYD?s Shenzhen listing:

Selling 79million A-shares priced at 18 yuan per share

Company will raise 1.42 billion yuan, 35% less than the maximum 2.19 billion yuan it was seeking

Proceeds will be used to fund lithium-ion battery production, automobile research and development, new car products and expansion of component business