Chinese spirit maker ZJLD’s IPO raises HK$4.5 Billion despite rocky start to trading

HONG KONG, CHINA — China’s “godfather of baijiu” launched Hong Kong’s largest IPO of the year on Thursday, with the holding company for four of his liquor brands raising around HK$4.5 billion (US$573 million) despite a rocky start to trading.

Wu Xiangdong, founder and chairman of ZJLD Group, earned the godfather moniker after establishing an empire of 12 companies specialising in the fiery tipple.

Ranging from around 35 to 55 per cent alcohol, the clear liquor packs a searing punch and a flavour profile that has evolved to match the powerfully spicy cuisine of southwestern China, baijiu’s heartland.

Its popularity in China has propelled demand, making it the most consumed spirit in the world — and, by extension, its major producers the most valuable distilleries.

“As a leading Chinese company focusing mainly on manufacturing middle-to-high grade fragrant liquor, ZJLD will take the listing as a new opportunity to enhance its popularity, to expand production and to ensure quality,” Wu said in his pre-listing speech.

He added that the demand for ZJLD’s products currently outstripped supply, as the liquor takes a long time to brew.

Backed by US investment firm KKR & Co, ZJLD had hoped to raise around HK$5.5 billion (US$700 million), but it fell well short of that figure after its share price dropped nearly two dollars, or 16 per cent, below the offering price of HK$10.82.

Even so, it’s nearly HK$4.5 billion in proceeds still amounted to more than half of what the Hong Kong Stock Exchange generated from IPO offerings in the first quarter of 2023.

Its total revenues have shown strong growth in the past few years and jumped by nearly 15 per cent (US$850 million) in 2022, making it the fourth-largest privately owned baijiu company, according to ZJLD’s prospectus.

Wu will retain control of 69 per cent of the company.

After establishing in1998 his flagship Jinliufu Baijiu company — which is not part of the ZJLD portfolio — Wu began acquiring historic distilleries from around the country in the 2000s.

The Jinliufu brand shot to fame in China after signing football manager Bora Milutinovic as a brand ambassador during the 2002 World Cup.

ZJLD focuses on premium baijiu offerings and is the first Chinese spirits company to successfully list since 2016.

It took ZJLD 70 days to complete the IPO procedure in Hong Kong, a process that normally stretches over three months.

“Everything went very smooth here,” Wu told AFP, adding Hong Kong was one of the best investment destinations in the world.

“It’s my favourite city and I have travelled to metropolises like New York and Paris,” he said.

— AFP

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