Reforms 'good news' for PE, VC firms, say experts

More than 80 percent of Chinese companies listed on the A-share market after the resumption of initial public offerings were backed by private equity and venture capital, but the average book return of investors will continue to decrease, according to ChinaVenture Group.

Forty-eight companies listed on the A-share market in January and February. Of them, 39 were invested in by PE and VC firms, raising 24.4 billion yuan ($3.97 billion). A total of 86 exits were made with book investment returns of 13.8 billion yuan.

Overseas yuan gets nod in mainland PE market

Restart of IPOs

"This is good news for the Chinese private equity and venture capital sector after a long wait. It showed that PE and VC firms promote the listings of companies to some extent," said Frankie Fang, China managing director of LGT Capital Partners.

The industry average book return multiples in January and February were 4.44 and 3.67 respectively, similar to that in the full year of 2012 of 4.38. The highest was in 2010 at 8, benefiting from the launching of the ChiNext market in October, 2009.

China had not had a new listing since October 2012, when the China Securities Regulatory Commission cracked down on fraud and misconduct among advisers. The first share after the resumption of IPOs went public on Jan 17 this year. "The industry average book return multiple has decreased annually since 2010 because the cost of PE and VC firms is increasing," said Song Shaokui, a senior analyst at ChinaVenture Group, adding that it would continue falling in the coming years but not by much, because the market is increasingly steady.

CITIC Private Equity Funds Management Co ranked the first by book return with 2.34 billion yuan from Shaanxi Coal Industry Co Ltd, followed by Sino-Singapore Investment Fund with 1.06 billion yuan from China Wafer Level CSP Co Ltd and Investor Growth Capital with 916 million yuan from NSFOCUS Information Technology Co Ltd.

Kuaijishan Shaoxing Rice Wine Co Ltd, which received investment from CITIC Private Equity Funds Management Co, passed the examination and approval process of the Chinese Securities Regulatory Commission and is waiting to go public.