VC-backed China companies plan U.S. IPOs

A Chinese IT outsourcing company and an optical components maker are aiming to select investment banks in the next two weeks with the goal of making U.S. IPOs by as soon as the first half of 2010, one of their investors said last week.

HiSoft, an IT outsourcing company in the cities of Beijing and Dalian, and NeoPhotonics, an optical components maker in the city of Shenzhen, were both close to selecting investment banks, Nikunj Jinsi, chief investment officer of International Finance Corp. (IFC) told Reuters.

“They’re a week away from selecting their bankers,” he said on the sidelines of a conference in Beijing. “They’re looking at a timeframe of the second or third quarter of next year.”

Both companies were looking at relatively modest fund-raising plans, most likely in the $75 million to $125 million range, he added.

HiSoft has raised about $20 million in venture funding from IFC, Intel Corp., GGV Capital, DFJ ePlanet Ventures and JAFCO Investment, according to Thomson Reuters (publisher of PE Week). NeoPhotonics, which also operates from a location in San Jose Calif., has raised an undisclosed amount of funding from IFC, Draper Fisher Jurvetson, Oak Investment Partners, ATA Ventures and DuPont Ventures, among others, based on Thomson Reuters data.

Jinsi said that a third company, China Digital Video (Beijing) Ltd., a maker of digital television technology known locally as Newauto, was also looking for investment banks for a U.S. public offering. Jinsi said that the company, which is also backed by the IFC, was not as far along in the process as the other two companies.

They would join a stream of about 10 Chinese companies that have gone to the Nasdaq this year to raise money since IPO activity has picked up with the ebbing of the global financial crisis. Two of the IPOs include online game companies and Shanda Games.

Jinsi did not specify on what exchange the companies intended to go public, but such smaller growth companies typically list on the Nasdaq to take advantage of its strong liquidity and relatively high valuations. Companies previously were also largely locked out of listing in the China market by stricter rules favoring large, former state-owned companies. But that could change in the coming years following China’s launch of a Nasdaq-style enterprise board, known as ChiNext, in October in the southern city of Shenzhen.

One Nasdaq-listed Chinese company, ChinaEdu, was considering spinning off one of its units for a listing on the ChiNext board, Julia Huang, CEO of the company, which specializes in online education services, told Reuters at the event.

But she added that plans were still at a very preliminary stage, and declined to give details.

“The first reason we’re considering this is that P/E ratios are relatively high,” she said. “The second is that most of our business is in China, so our reputation is much bigger here.”