Bottled Water Company Nongfu Spring Plans $1b Hong Kong IPO

Chinese bottled water manufacturer Nongfu Spring is pressing ahead with its Hong Kong initial public offering (IPO) worth up to $1 billion, as the city’s capital markets show signs of reviving following the global coronavirus outbreak.

A preliminary prospectus lodged with the Hong Kong Stock Exchange by Nongfu shows it will work towards a listing despite its business being impacted by the pandemic on its mainland market.

Nongfu is the leading bottled water producer in China and is a top three player in the bottled tea and juice market, according to its prospectus.

The company recorded 24 billion yuan ($3.40 billion) in revenue in 2019, up from 20.47 billion yuan a year earlier, and is aiming towards a listing in the third quarter.

The prospectus shows Nongfu recorded a 2019 profit of 4.95 billion yuan, which was a 20.6% increase on its 3.61 billion yuan profit in 2018.

In the documents, Nongfu said its mainland production plants had been closed after Chinese New Year following the coronavirus outbreak in the Wuhan province.

It said all of its production plants were now operational.

“During the COVID-19 outbreak, our sales of beverage products decreased compared to the same period in 2019,” it said.

“According to the information currently available, our revenue and net profit decreased in the three months ended March 31, 2020, compared with the three months ended March 31, 2019.”

A listing of at least $1 billion will be welcomed by Hong Kong’s capital markets bankers, given the largest IPO this year was the $333 million listing of drug developer Akeso in mid April.

There has been just $2.45 billion worth of IPOs in 2020, according to Refinitiv, down from $4.27 billion for the same time in 2019.

It was reported last week that JD.com has filed confidentially to raise up to $3 billion in a Hong Kong secondary listing as early as June.

There has been $12.81 billion worth of equity capital market activity in Hong Kong during 2020 but primarily in follow-on deals and convertible bond transactions, Refinitiv data showed.

The largest deal so far has been the $1.4 billion block trade when SK E&S sold out of China Gas Holdings on April 17, Refinitiv said.

China Capital International Corp (CICC) and Morgan Stanley are sponsoring Nongfu’s Hong Kong IPO, while Freshfields Bruckhaus Deringer is the legal adviser.

Reuters