Chinese auto rental company CAR Inc soars 28 percent in HK debut
Sep 20, 2014 07:42 AM EDT
Sep 20, 2014 07:42 AM EDT
Shares in China's largest auto rental company CAR Inc (0699.HK) surged as much as 28 percent in their Hong Kong trading debut on Friday as investors scrambled for exposure to a market expected to almost double to $11 billion by 2018.
The retail portion of the IPO generated red-hot demand, accounting for more than 200 times the shares on offer, triggering a so-called claw-back rule that forced underwriters to reallocate shares from institutional investors to individuals, CAR Inc said in a filing on Thursday.
Investors who missed the institutional tranche swooped on the shares when they debuted on the market, seeing strong updside in the dominant player in a rapidly growing industry.
China's market for short-term, self-drive car rentals is expected to grow at an average of 27 percent a year from 2013 to 2018, according to estimates from industry consultancy Roland Berger cited in the prospectus.
The market is forecast to surge to 65 billion yuan ($10.6 billion) by 2018, nearly double 2013 levels, it said.
Restrictions on car ownership to limit pollution in certain cities would buoy demand, along with rising disposable income meaning more people would be able to travel and take vacations.
The industry's expected growth rate in China is more than double the 13 percent expected in Brazil and far outpaces the 6 percent expansion in the United States, the company said. Long-term rentals are forecast to grow 11 percent a year through the same period.
Other players include eHi, which plans an up to $150 million U.S. IPO this year, Yestock and Avis, but CAR Inc's fleet was bigger than its next nine largest competitors combined.
CAR Inc, which is backed by private equity firm Warburg Pincus [WP.UL] and Hertz Global Holdings Inc (HTZ.N), raised $467 million after pricing the deal at the top of a HK$7.50 to HK$8.50 per share marketing range.
It was the biggest IPO in Hong Kong since the world's largest pork producer WH Group Ltd. (0288.HK) raised $2.36 billion in late July.
The company had originally planned to go public in the United States in 2012, but later pulled a $138 million offering citing poor market conditions.
"I'm very happy about deciding to come here," Charles Lu, chairman and chief executive officer of the company, said at the listing ceremony in Hong Kong. "In Hong Kong people know the Chinese market very well and it's very close to us, it's easier to manage."
The company plans to use most of the proceeds to buy up to 59,000 vehicles to more than double its fleet, with 19 percent set aside to pay down bank loans. The remainder of the funds will be used to develop new services and for working capital, CAR Inc said.
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