The waiting list for companies planning an IPO in China continues to get longer, with 11 more companies submitting applications to the securities regulator on Tuesday, bringing the total to more than 670, according to the China Securities and Regulatory Commission (CSRC).
The most significant of them, Huaibei Mining, a Chinese coal miner, is looking to raise Rmb6 billion ($960 million) by selling 2.2 billion new shares in a Shanghai IPO, making it the biggest IPO officially announced so far this year.
The offering accounts for 24.5% of the enlarged share capital of the company. China Galaxy Securities is the bookrunner of the deal, according to a statement on the CSRC’s website.
The miner plans to use the proceeds from the fundraising to upgrade mining machines, fund the expansion of new plants and settle debt. It had a high debt ratio of 66.7% at the end of 2011.
The company’s net profit was $137 million and its unaudited net assets were $2.9 billion in 2011, according to a preliminary IPO prospectus.
Huaibei’s bigger domestic competitor Shaanxi Coal Industry won approval from the CSRC last year for a Rmb17.3 billion ($2.7 billion) IPO in Shanghai.
Shanghai-listed shares in China’s top coal miners — Shenhua, Yanzhou and China Coal — have increased 6% to 9% so far this year, compared with a 10% increase in the Shanghai Composite Index. The three coal players are currently quoted at an average of 11 times 2012 P/E.
Most of the other companies joining Huaibei on the IPO waiting list are relatively small, with some planning to list on the second board.
Shanghai’s primary equity market has been dominated by smaller deals so far this year. The three biggest IPOs this year have raised less than $1.5 billion in total. China Communications Construction raised $791 million, Zhejiang AoKang Shoes raised $327 million and Jishi Media raised $312 million.
Regulators’ efforts to curb excessive IPO valuations have driven down the average price of new offerings to about 20 times earnings early this month. IPO valuations are now more in line with the secondary market after falling from a multiple of more than 30x in the first quarter of the year and 47x last year, said Guo Shuqing, chairman of the CSRC in a statement on the watchdog’s website.
Coal is China’s most widely used fuel, meeting 80% of the country’s energy needs every year. Power plants, which are the country’s major coal consumers, recorded slower output growth in March due to the country’s economic downturn. Data from the National Bureau of Statistics show that electricity output grew by 7.2% last month, which was lower than expected.
Separately, People’s Daily Online, the portal of Chinese Communist Party’s official newspaper, has raised Rmb1.4 billion in an enlarged Shanghai IPO. The company sold 69.1 million shares at Rmb20 each, at the bottom of the indicated price range.