High-speed rail firm preparing for IPO

China Railway Corp (CRC) said on Tuesday that its lucrative subsidiary Beijing-Shanghai High-Speed Railway Co is preparing for an IPO on the A-share market, part of the company's push for market reforms.

Passengers get on a high-speed train bound for Shanghai at a Beijing railway station on January 5. (Photos: VCG)

The move, also another important step in the mixed-ownership reform of Chinese state-owned enterprises, could bring both opportunities for the state-owned company as well as challenges in navigating through complex reforms required for listing, analysts said.

The company was founded in 2008, with China Railway Investment Co - fully owned by CRC - holding a 46.21 percent stake, data on research platform tianyancha.com showed.

In the short term, listing the Beijing-Shanghai high-speed line can help CRC raise funds to repay debt, Zhao Jian, a professor at Beijing Jiaotong University, told the Global Times on Wednesday. The state-owned CRC reportedly has fast-accumulating liabilities.

But going public will be a challenge, pushing the company to operate with more transparency, Zhao said.

"A public company has to be responsible to its shareholders. Transactions among related parties within the railway system must be clear and precise." 

Beijing-Shanghai High-Speed Railway is a cash cow. After breaking even in 2014, the corporation had generated 31.17 billion yuan ($4.66 billion) in profits by 2017, National Business Daily reported in July 2018. 

Being able to list on the main board means the company has to pass many financial thresholds. "This justifies the profitability of the company," Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told Global Times on Wednesday.

This premium asset will be open to more players to invest. "Large companies in related industries and some sovereign funds can be brought in as strategic partners," Dong said.

"It is still a while until the company officially files for an IPO," Dong said.  "But if it moves fast enough, the company can be listed before the end of this year due to its solid financial performance." 

"The IPO will set an example for more to come," said Sun Zhang, a railway expert and professor at Shanghai Tongji University. "Leveraging more private capital into the railway sector especially in the economically developed regions in China will juice up the whole industry," Sun said.