Hong Kong IPO pipeline grows as Chinese restaurant chain Xiaocaiyuan files listing application

Mainland Chinese restaurant chain Xiaocaiyuan International Holding has filed an initial public offering (IPO) application in Hong Kong, hoping to raise funds to expand its branch network offering fare from the eastern Anhui province.

The Tongling, Anhui-based chain joins a handful of companies, mostly from the mainland, that have been eager to test the IPO waters in the city so far this year.

Xiaocaiyuan’s filing late on Tuesday did not provide details, but an IFR report from August said it could raise US$200 million. UBS and Huatai Financial Holdings are the overall coordinators of the IPO.

Harvest Capital, a Chinese private-equity company and the company’s sole external investor, injected 500 million yuan (US$69.7 million) into Xiaocaiyuan in December. This was preceded by an initial investment in March, but the amount was not disclosed.

Founded by Wang Shugao in 2013, who worked as a chef previously, Xiaocaiyuan currently operates more than 500 restaurants across China.

The company reported a profit of 207 million yuan in the first nine months of 2022, when stringent Covid-19 restrictions prevailed. This increased to 429 million yuan in the same period in 2023.

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Market participants seem optimistic about the prospects for IPOs in Hong Kong, with some expecting a revival that will push the city back into the top five listing venues globally. KPMG forecasts fundraising in the city this year will reach twice the level seen in 2023.

So far this year, nine companies have applied to list. A “moderate improvement compared with last January, which saw six applications,” said Edward Au, southern region managing partner at Deloitte China.

With the US Federal Reserve likely to lower rates from the second half of the year, a rebound in liquidity in Hong Kong can be expected, he added.

Last year’s biggest listing was that of baijiu distiller ZJLD Group, which raised HK$5.31 billion (US$676.4 million), followed by Wuxi Biologics’ Wuxi XDC unit, which raised HK$4.07 billion.

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Mixue has since revised its application to add two more banks – Huatai Financial Holdings and CICC – as overall coordinators, the company announced on Tuesday.

The banks will work alongside Merrill Lynch, Goldman Sachs and UBS. The bubble tea giant is said to be looking to raise between US$500 million and US$1 billion.

Xiaocaiyuan follows a standardised, digital and intelligent system to serve the high-frequency and fast-growing mass catering industry, according to Harvest Capital.

The company is aiming to tap a growing consumer market in China that is looking for low-budget, high-quality, fast and ready-to-go meals.