(Yicai Global) Aug. 25 -- Nongfu Springs priced its shares unexpectedly low as the Chinese bottled water giant seeks to raise as much as HKD8.35 billion (USD1.1 billion) in its initial public offering in Hong Kong.

Nongfu priced the shares at HKD19.50 to HKD21.50 (USD2.52 to USD2.77) each, according to a prospectus posted on the Hong Kong Stock Exchange’s website today. The market previously expected a range of between HKD23 and HKD30.

The shares on offer represent less than 4 percent of the Hangzhou-based company’s total, and big cornerstone investors have grabbed a large chunk, further shrinking the amount available to others. That sets the stage for the subscription period to devolve into a feeding frenzy.

Nongfu has had the largest market share in China's packaged drinking water market for eight consecutive years, with 20.9 percent last year, according to its prospectus. The firm’s tea and energy drinks occupy third place with a more than 7 percent market share.

China's soft drinks buyers swallowed CNY991.4 billion worth last year, according to a Frost & Sullivan report. The compound annual growth rate is forecast to stay at 5.9 percent from 2019 to 2024.

Nongfu had revenue of CNY17.5 billion (USD2.52 billion), CNY20.5 billion and CNY24 billion from 2017 to last year. Net profit was CNY3.39 billion (USD490.4 million), CNY3.61 billion and CNY4.95 billion in the same periods. In the first five months of this year, the Covid-19 pandemic lopped 12.6 percent off revenue and 18.2 percent off net profit.

A quarter of the funds raised in the IPO will go toward brand building, the prospectus showed, while 25 percent will be used to buy equipment such as refrigerators. Some 20 percent will be allocated to boosting production. The remainder will be used to repay bank loans.

Founder and Chairman Zhong Shanshan, who set up Nongfu Spring in 1996, directly or indirectly holds 87.5 percent of its total share capital, according to the prospectus. After the IPO, he will keep around 84.4 percent of all shares.

The stock is expected to debut on the Hong Kong main board on Sept. 8.

Editor: Ben Armour