China South Locomotive & Rolling Stock Corporation, the mainland's largest train carriage manufacturer, will kick off the public subscription of its Hong Kong IPO today.

The Hong Kong IPO is expected to issue 1.6 billion H-shares to raise up to HK$4.43 billion. The company, that plans a dual listing in Shanghai and Hong Kong, earlier planned to issue 2 billion shares.

Secretary of the board of directors Shao Renqiang said that the fundraising could lower the company's gearing ratio from current 80 percent to about 60 percent.

He admitted that the 80-percent gearing ratio is at a high level, which was mainly due to the increase of bank-mortgage financing in recent months.

The company chairman and executive director, Zhao Xiaogang, said the downsizing of IPO scale will not affect the company's financial stability.

"The size is still within our target range. We believe the company does not need to leverage the market within two years," Zhao said.

Even under the unstable market condition, Zhao remained positive that the IPO could attract investors with its strong fundamentals. He also expressed satisfaction with the response of the international offer.

The company's gross profit margin was 18.2 percent through March, up 41.9 percent year-on-year.

Zhao said the company earlier launched a series of lucrative high-power electric automobiles, pushing up its profit margin, but the overall profit margin is expected not to stay at that level throughout the year.

Regarding the company's H-share subsidiary Zhuzhou CSR Times Electric, Zhao said the company has no plans to privatize the subsidiary after listing.

Share of China South Locomotive & Rolling Stock Corporation is expected to trade on the Hong Kong exchange on Aug 21.

(HK Edition 08/08/2008 page6)