(Yicai Global) June 30 -- Shares in Chinese fruit tea chain Nayuki Holdings dropped as much as 14.8 percent below the issue price today on its first day of trading on the Hong Kong stock exchange, despite being oversubscribed 206 times.

Nayuki’s stock price [HKG:2150] closed at HKD17.10 (USD2.20) today, 13.6 percent less than the offer price of HKD19.80, giving it a market capitalization of HKD29.3 billion (USD3.7 billion). Earlier in the day it had dropped to HKD16.86.

The listing has raised HKD5.09 billion (USD655.5 million) for the teahouse chain, much less than the anticipated windfall of HKD5.9 billion.

Nayuki, which is the first modern fruit tea brand to list in Hong Kong, is likely to grow at an annual compound rate of 30 percent over the next few years, said Wang Ling, chief analyst of the food and beverage industry at East Asia Qianhai Securities. Since 2016, it has grown at an annual compound rate of over 75 percent, he added.

The Shenzhen-based firm’s share sale, which ran from June 18 to 23, was oversubscribed 206 times as of June 22, causing the IPO to close one day early. Cornerstone investors included UBS Asset Management and a number of top Chinese publicly-offered funds.

Around 70 percent of the funds raised will be used to expand its teahouse chain and increase market penetration, Nayuki said earlier. Another 10 percent will go toward strengthening technological capabilities so as to raise operation efficiency. A further 10 percent will be spent on improving the management of supply chains and the rest will as used to supplement general working capital.

Despite rapid expansion in recent years, Nayuki is already turning a profit. Last year it raked in profit of CNY16.6 million (USD2.6 million) compared with losses of CNY11.7 million in 2019, according to its IPO prospectus. It also recorded a 22.2 percent jump in revenue to CNY3.06 billion.

Founded in 2015, Nayuki operates more than 489 tea outlets in 66 cities across China. It is the second-largest teahouse chain in the country with 18.9 percent market share last year, according to China Insights Consultancy. Nayuki also has one teahouse in both Hong Kong and Japan.

Editor: Kim Taylor