China Postal Express & Logistics, a unit of China Post Group, is planning to raise Rmb9.98 billion ($1.6 billion) from a Shanghai initial public offering that could be the biggest in China this year.
The company will issue a maximum of 4 billion A-shares or 33% of its enlarged share capital, it said in a prospectus published on the website of the China Securities Regulatory Commission (CSRC) during the weekend. It didn’t give information about the price range of the proposed offering.
The securities regulator said in a separate statement that it will review the company’s IPO application on May 4.
If approved, it would be the biggest IPO officially announced in China so far this year. Huaibei Mining, the previous biggest applicant, said last week that it would raise Rmb6 billion ($960 million) by selling 2.2 billion A-shares.
Parent group China Postal will retain a more than 63% stake in the company after its IPO. Founded in 1985, China Postal has a vast network covering 31 Chinese provinces, making it the country’s biggest courier service provider. Big global names such as DHL, UPS and TNT all have operations in China and offer better customer service, but foreign players have still found it hard to penetrate the domestic market.
China Postal plans to use the proceeds from the deal to build distribution centres in different regions of the country and to buy trucks and aeroplanes. Citic Securities is underwriting the deal.
Revenues in the delivery and logistics industries are closely tied to the country’s economic development and to people’s purchasing power, the company said in its prospectus. Official statistics show that there are more than 70 couriers in China, not counting the large number of unlicensed couriers.
China Postal’s profitability is also sensitive to rising wages. The company has seen its operating costs growing as the ratio of transportation and labour costs to overall costs has climbed to 62% in 2011 from 57.6% in 2010, according to the prospectus.
The waiting list for companies planning an IPO in China grew to more than 670 last week. Other sizeable deals include Golden Dragon Precise Copper’s planned Rmb3.5 billion A-share sale.
CSRC is in the midst of a series of market reforms. It is in talks to set new application rules for listing candidates, reform IPO approvals and improve the pricing mechanism.
“Currently, the market [is] still at the stage of emergence and transition,” said Guo Shuqing, chairman of CSRC in a statement posted on the regulator’s website. “There were various irregularities, of which speculations in IPOs, small-cap stocks and those with bad business performance were serious.”
China’s stock exchanges announced on Monday that they will slash brokerage fees for A-share transactions by more than 20% starting June 1. The cuts in transaction fees will lower investors’ burden and help save investors about Rmb3 billion a year, an official at CSRC told Xinhua News.