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China Auto Rental seeks US IPO

China's largest car rental company is seeking a major capital injection via the US Stock Exchange.

China Auto Ltd. plans to raise $300m (1.9 billion yuan) on the New York Stock Exchange in an initial public offering. The company will offer American depository shares under the symbol “CARH”, not dissimilar to rival Avis' “CAR” listing, and will be underwritten by investment group JP Morgan Chase & Co.

China Auto Rental unit

A China Auto Rental unit in Shanghai Image:China Daily

The IPO is the first of its kind by a Chinese company since US regulators changed the rules, which now forbid foreign issuers from keeping the first draft of their registration statements private.

The Beijing-based rental service will use the capital generated to repay debts and purchase new vehicles. Last year, China Auto Rental received a $150 million (1 billion yuan) investment from Legend Holdings Ltd, which it used to expand its fleet from 4,000 to 10,000 cars. Despite revenue soaring eightfold to $77 million (489 million yuan) in the first nine months of 2011, boosting the company's fleet to 26,000 vehicles, losses still widened to $18.6 million (118 million yuan).

Though potentially highly lucrative, the Chinese rental market is over-saturated. According to China Daily, there were over 10,000 rental companies operating in China, more than half of which were operating in Beijing, Guangzhou, Shanghai and Shenzhen. Rival company Ehi Car Rental is the fastest growing rental company in China and received a Goldman Sachs-led investment of $70 million (443 million yuan) last year.

Tags: automotive industry, China, Corporate News, North America, OEM and automotive

Published 27th January, 2012

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