BEIJING, Feb. 25 -- China Railway Construction Corp plans to raise as much as 22.25 billion yuan (3.11 billion U.S. dollars) in its Shanghai initial public offering after setting its price range and reducing the supply of shares.

    It proposed a range of eight to 9.08 yuan for the offer price of its Shanghai sale, which will be followed by a Hong Kong float, the nation's second-largest infrastructure contractor said yesterday. The range will represent a price/earnings ratio of 26.92 to 30.56 based on its 2007 net profit.

    "As major IPOs on the Chinese mainland have all fixed their offer prices at the top of the indicated ranges since 2007, it should be no problem for China Railway Construction to follow suit," the company said.

    Subscriptions for China Railways Construction's IPO will open today and tomorrow, with the final offer price due to be announced on Thursday. Trading will start in the first 10 days of March, it said.

    But the company said it is cutting the offer size, aiming to sell no more than 2.45 billion yuan-denominated A shares. In its earlier listing prospectus, China Railway Construction said it aimed to sell up to 2.8 billion A shares, or 25.93 percent of its enlarged share capital. That would have valued the Shanghai sale at 25.42 billion yuan.

    The company has said it will use proceeds of the Shanghai sale to buy construction equipment, expand machinery production, develop the property sector, finance construction of a passenger rail line and repay bank loans, with a combined cost of 15.87 billion yuan.

    "As 25.42 billion yuan would far exceed the 15.87 billion yuan it wants, they chose to cut the number of the offer shares," said one source close to the matter. "This is also related to the weak sentiment in home and global markets as they have to consider how much the market can handle now. A reasonable sale size would prevent the stock tumbling after a sharp opening rise and would benefit investors in the secondary market."

    China Railway Construction, which has just won tenders to build rail projects in Libya, is China's top rail builder by overseas contracts. The price range for the Hong Kong offering of 1.706 billion H shares, designed for international investors, could be higher than the A-share portion, the company said.

    (Source: Shanghai Daily)