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December 18, 2009

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VC, PE firms gain from IPOs

VENTURE capital and private equity firms managed to gain an average return of 6.77 times from their investments in the second batch of eight firms that listed on China's Nasdaq-style board.

The return, based on the firms' initial public offering price, exceeded the 5.76 times for the first batch of 28 companies on ChiNext, which aims to offer a financing channel for innovative start-up firms, Zero2IPO Research Center said in a report yesterday.

The average price-earnings ratio of the eight startups was 83.59, compared with the average of 56.7 for the first batch on ChiNext in Shenzhen.

Five out of the eight startups were backed by six VC and PE firms, the report said.

Of the six, Guosen Securities Co earned average return of 5.48 times from its investment after its PE subsidiary invested in three companies - Jinlong Machinery & Electronic Co, Guangzhou Improve Medical Instruments Co and Beijing Cisri-Gaona Materials & Technology Co.

Two firms, which invested in clean technology company Cisri-Gaona, got the highest return ratio of 9.26 times on average.

"The ChiNext is expected to be a major channel for VC and PE firms as they can get good returns backed by the high price-earnings ratio of the firms listed on it," Zero2IPO said.

Of the first batch of 28 companies, 20 were backed by 33 VC and PE firms.

The third group of six firms to list on ChiNext will begin selling 129 million shares on Thursday to raise 1.23 billion yuan (US$180 million).


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