CHINESE firms marketing initial public offerings (IPOs) are settling for lower valuations than most investors were willing to pay, evidence that a government crackdown on overpriced deals is yielding results.

    Beijing Utour International Travel Service Co., Hebei Huijin Electromechanical Co. and Yangzhou Yangjie Electronics Technology Co. priced IPO shares at below-average valuations for their respective industries after rejecting most investor bids for stock as too high, according to statements on the Shenzhen Stock Exchange’s website yesterday.

    The announcements suggest the China Securities Regulatory Commission’s decision over the weekend to tighten IPO supervision is yielding more favorable terms for investors.

    Cracking down on overpriced sales was the centerpiece of an IPO reform the regulator announced in November before it ended a more than yearlong deal freeze, as it seeks to shore up investor confidence.

    “We need to be prudent during the pricing and marketing procedures,” Ding Xiaowen, co-head of investment banking at UBS AG’s Chinese securities joint venture, said yesterday at a press conference in Shanghai when asked about the China Securities Regulatory Commission’s measures. “We will try our best to make sure all market participants will be happy about our pricing. This may not always achievable but this is our goal.”

    Utour International, Hebei Huijin and Yangjie Electronics — among the first batch of companies approved to list shares after the IPO freeze ended — are raising a combined 1.03 billion yuan (US$170 million). The securities regulator said Nov. 30 it will crack down on practices that led to overpriced deals, including investors colluding with companies to drive up valuations by making high bids with no plans to actually buy the stock.

    Chinese companies marketing IPOs meet investors during roadshows lasting typically up to a week, a process in which fund managers are asked to indicate how much they’re willing to pay. After examining the bids, the company announces a price for its shares and starts taking orders.

    Utour International, a travel agency based in Beijing, plans to sell stock at a 42 percent discount to average valuations in the leisure industry after excluding the top 96 percent of bids from institutional investors, according to its statement to the Shenzhen exchange.

    Hebei Huijin, a maker of cash-handling machines, also said it eliminated the highest 96 percent of bids and priced its IPO at 21.3 times 2012 earnings, below the industry average. Yangjie Electronics, which makes electronic components for Royal Philips NV and Qingdao Haier Co., announced pricing that it said was in line with peers after turning away the top 94 percent of bids.

    The CSRC said Jan. 12 it is planning spot checks of investor roadshows held for first-time sales and will suspend offerings by companies found to have disclosed information not contained in IPO prospectuses and other public releases.

    That announcement came two days after Jiangsu Aosaikang Pharmaceutical Co. announced it was delaying an IPO on Shenzhen’s ChiNext board for startups, which it said was priced at a 21 percent premium to the industry.

    Nanjing-based Aosaikang said Jan. 10 it delayed the 4.05 billion yuan offering because the sale would have been “relatively large.” The deal valued Aosaikang at 67 times 2012 earnings, compared with the average 55.3 times for ChiNext-listed drugmakers, the company said, citing Shenzhen Securities Information Co. data.

    The CSRC didn’t order Aosaikang to halt its IPO, and the decision was made by the company and its underwriter, Shanghai Securities News reported Jan. 10 on its website, citing CSRC spokesman Deng Ge. (SD-Agencies)