Come­back of IPOs ‘wel­come news’ for PE, VC com­pa­nies

China Daily (Hong Kong) - - BUSINESSMARKETS - By CAI XIAO caix­iao@chi­nadaily.com.cn

Pri­vate eq­uity and ven­ture cap­i­tal firms have in­vested in about 20,000 Chi­nese com­pa­nies, but they’ve only cashed out from fewer than 3,000, so the pend­ing re­sump­tion of ini­tial pub­lic of­fer­ings is a wel­come de­vel­op­ment, Ni Zheng­dong, chair­man of the Zero2IPO Group, said on Wed­nes­day.

“Spring is com­ing for the PE and VC sec­tor, fol­low­ing an in­dus­try reshuf­fle and the re­sump­tion of IPOs. The first move for many of th­ese firms will be achiev­ing an exit from their in­vest­ments,” Ni said.

Ni said that in the past 10 years, the re­turn on in­vest­ment for PE deals in China has been about 20 per­cent. But con­di­tions have changed, and in­vestors can’t rely any longer on the com­bi­na­tion of high re­turns and low risks.

In­stead, PE in­vest­ment will fea­ture mod­er­ate risks and re­turns.

So far, 83 Chi­nese com­pa­nies have re­ceived ap­proval from the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion to con­duct IPOs. About 50 are ex­pected to be listed by the end of next month, ac­cord­ing to the CSRC.

Among the 83 com­pa­nies, Leg­end Cap­i­tal has in­vested in three com­pa­nies. That’s the largest num­ber for any sin­gle PE or VC firm.

The CSRC is re­form­ing the pro­ce­dure for new list­ings, and the pace of new share of­fer­ings will be faster, which is ben­e­fi­cial for PE and VC in­vestors seek­ing ex­its via IPOs.

Merg­ers and ac­qui­si­tions are cur­rently the main meth­ods of ex­it­ing in­vest­ment for PE and VC firms, ac­count­ing for 32 per­cent of all ex­its as of Nov 30.

Eq­uity trans­fers, man­age­ment buy­out and IPOs were

Spring is com­ing for the PE and VC sec­tor, fol­low­ing an in­dus­try reshuf­fle and the re­sump­tion of IPOs. The first move for many of th­ese firms will be achiev­ing an exit from their in­vest­ments.” NI ZHENG­DONG CHAIR­MAN OF THE ZERO2IPO GROUP

other im­por­tant exit meth­ods, ac­cord­ing to Zero2IPO.

With do­mes­tic IPOs hav­ing been sus­pended for more than a year, Chi­nese com­pa­nies have in­creas­ingly turned to over­seas ex­changes.

In the first 11 months of the year, 47 com­pa­nies had gone pub­lic in Hong Kong and the United States, rais­ing more than $ 10.8 bil­lion. Among th­ese, 24 were listed in Oc­to­ber and Novem­ber alone. For some PE firms, those over­seas IPOs have of­fered an exit.

Mean­while, Chi­nese PE and VC firms are still find­ing it rather dif­fi­cult to raise funds.

In the Chi­nese PE mar­ket, $30.9 bil­lion was raised in the fi rst 11 months of this year, $21.6 bil­lion by yuan-de­nom­i­nated funds and $9.3 bil­lion by dol­lar-de­nom­i­nated funds.

Al­most 40 per­cent of the money fi­nanced was tar­geted for in­vest­ment in the prop­erty sec­tor.

In the Chi­nese VC mar­ket, $ 5.8 bil­lion was raised by yuan-de­nom­i­nated funds and $ 557 mil­lion by dol­lar­de­nom­i­nated funds from Jan­uary to Novem­ber.

The In­ter­net, mo­bile In­ter­net, health­care, clean tech­nol­ogy and con­sumer sec­tors have been pop­u­lar among PE and VC in­vestors this year.

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