Our reporter Zhao Tonggang, Wang Guangping, Xia Lihua
The domestic stock market continued to be active, and the pace of overseas listing in the red chip mode slowed down, making some private equity funds (PE) exit channels targeting the A-share market. Industry insiders predict that more and more PE will choose the A-share market as the exit place in the future.
Narrow overseas exit channels
PE, especially PE with foreign capital background, has mostly exited through overseas listing. For example, Focus Media, Ctrip and other companies with private equity participation have been listed on NASDAQ. According to the 2006 annual report on the listing of Chinese enterprises issued by Zero2IPO Group, last year a total of 28 Chinese enterprises supported by PE or VC funds were listed on domestic and overseas capital markets. Among them, 23 chose to withdraw from overseas IPO, and only 5 start-ups chose to list on the domestic SME board.
However, since last September Ministry of Commerce , SASAC CSRC Since the implementation of the Provisions on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors jointly issued by six ministries and commissions, only Yingli Green Energy Holding Company has achieved overseas listing through cross-border acquisitions. PE's exit from overseas listing is significantly reduced.
"According to the new policy, companies that have completed equity restructuring before and participated in by private equity funds still have the opportunity to list overseas. However, it is estimated that companies that have not completed equity restructuring will be difficult to obtain approval for their overseas listing applications." Kang Zhongmai, chairman of Zero2IPO Group, said.
A-share market becomes a new choice
Recently, PEs began to lock their exit channels in the A-share market, and CDH Investment, Hony Investment and other PEs have made relevant attempts.
"Recently, a listed company producing vaccines will apply for A-share IPO, among which foreign PE will become a shareholder." Wu Kezhong, president of Advantage Capital, introduced.
The latest research report on the listing of Chinese enterprises in the second quarter of 2007 released by Zero2IPO Group shows that three of the 15 IPO enterprises supported by VC/PE in the second quarter have chosen to list in the A-share market. The good effect of PE's choice to withdraw from the A-share market has been reflected. In June this year, the equity lock of Shenzhen Dachen Investment Coship Electronics ended regularly, and the PE yield of the investment reached 40 times.
Zhao Xijun, deputy director of the Institute of Finance and Securities of Renmin University of China, believes that "the continuous development of the domestic stock market, the launch of the SME board and the construction of a multi-level capital market have created conditions for PE to withdraw from the domestic market."
Promote the development and growth of local PE
Wu Kezhong, President of Advantageous Capital, said that the biggest problem faced by foreign PE at present is how to transfer funds overseas after exiting from the A-share market under foreign exchange control. In addition, taxation is also a problem. According to the Income Tax Law of Foreign Enterprises, when a foreign-funded PE exchanges the share sale price for foreign exchange, 20% income tax shall be paid on the investment income. However, the revised Partnership Law was implemented on June 1 this year, which is undoubtedly good for domestic PE, because PE in the form of partnership will enjoy preferential policies of low tax rates.
"The regulatory authorities will encourage and take measures to promote the withdrawal of PE from the A-share market, and study and formulate laws and regulations in line with China's national conditions and PE development laws to promote the development and growth of local PE institutions," said a person from the management department.
He Qiang, director of the Securities and Futures Research Institute of the Central University of Finance and Economics, believes that the domestic exchanges now only have the SME board in addition to the main board, and the GEM market has not been launched, which makes PE exit channels not smooth enough. Therefore, there is an urgent need to launch the GEM market to provide PE with a larger exit channel.
