China's biggest liquor company Moutai Group is looking at Hong Kong as a potential venue to list its winery unit, as domestic regulators increasingly exercise discretion over the type of companies they want to list on the mainland.
Moutai Wine is meeting banks for an IPO which could raise at least US$500m as early as this year, according to people with knowledge of the matter.
The company is seeking advice from banks on the venue and is deciding between a Hong Kong or A-share listing.
According to two of the people, Hong Kong could be the better option as the China Securities Regulatory Commission recently gave guidance to bankers that companies in certain sectors, including producers of baijiu (white liquor), will not be allowed to list domestically as Beijing wants to channel funding to strategic industries.
“What the Chinese market regulator is giving us is window guidance only and it’s unclear if all alcohol companies are banned from listing domestically,” said one of the people. “The issuer could probably raise more in the A-share markets but listing in Hong Kong could avoid the potential regulatory hurdle.”
Chinese white liquor company ZJLD Group in January filed for a Hong Kong IPO which could raise about US$400m, while rival Guizhou Guotai Liquor Group, which filed for a Shanghai IPO in 2020, has given up on the A-share listing and is pressing ahead with a US$500m Hong Kong IPO instead.
State-owned Moutai Group also owns Shanghai-listed liquor giant Kweichow Moutai, which is the largest company in China in terms of market capitalisation. As of Thursday, its shares were up 5.8% this year to Rmb1,828 for a market cap of Rmb2.3trn (US$334bn).
Restricted sectors
Apart from baijiu distillers, the CSRC has also advised that it has stopped allowing companies in the education, funeral and religious sectors to list in Shanghai and Shenzhen, according to bankers who have been briefed on the guidance.
“They haven’t explained much about why these sectors are not allowed to list, but they have said clearly they would encourage companies from sectors such as advanced technology and biological research and development to list as these sectors are in line with the country’s policy to promote technological self-reliance,” said one of the bankers.
While not completely banned, companies from the food and beverage sector are under close scrutiny by the regulator. Only leading players can submit listing applications and the regulator will consider them based on their scale, brand awareness and reputation.
Some banks are now trying to persuade Mixue Bingcheng, a bubble tea, ice cream and coffee take-away chain that filed last September for a Rmb6.5bn Shenzhen IPO, to shift to Hong Kong instead, where it could potentially face less regulatory scrutiny.
The company’s franchising strategy allows it to expand quickly, but it has faced food safety concerns after some of its franchised stores were found to be using expired ingredients for tea and ice cream.
Founded in 2002, Moutai Wine sells products in a price range of about Rmb60–Rmb800 (US$8.64–$115) per bottle. It has vineyards in the Jieshi mountain area of China's Hebei province and also sources grapes from France, Italy and Chile.
Moutai Wine did not respond to emails seeking comment.