China Railway Signal Co. to List $1.8 Billion IPO on Hong Kong Market

By Lauren Dodillet

State-owned China Railway Signal and Communications Corporation began looking for investors for its $1.8 billion Hong Kong IPO last Monday. The company—which makes signal systems used by China’s train network—opened up to institutional investors yesterday, and plans to list on the Hong Kong exchange August 7.

Citigroup Inc., Morgan Stanley Wealth Management, and UBS Group AG are joint sponsors on the listing, while Macquarie Group Ltd. is the financial adviser. Proceeds from the IPO will be directed toward developing the company’s products and future overseas acquisitions. Reuters reports that China Railway Signal is the world’s largest railway signal systems provider by revenue—its net profit last year was $2.03 billion, and already has several overseas projects in Asia, Africa, and South America, and supplies equipment and services to over 20 countries.

The company’s listing comes as China is increasing its investment into its railway infrastructure. According to the Wall Street Journal, total investment is expected to increase to $77 billion by 2020 from $44 billion in 2014.

The listing will be the first major offering since China’s stock market began declining in June, and the third largest this year. Markets have continued to fall despite the government’s efforts to mitigate the drop, but Hong Kong has been a favorite venue of Chinese companies for its access to global investors. Though the stock market there has dropped 96 percent to $223 million since mid-June, Hong Kong IPOs have already raised $18.4 billion so far this year.