(Yicai) Oct. 20 -- The Shenzhen Stock Exchange said it has launched an inquiry into the proposed CNY6 billion (USD820 million) initial public offering of Fuhua Tongda Chemical, as the herbicide maker intends to use the funds to repay debt after having paid out big dividends in the past two years.

The SZSE sent a letter to Tongda Chemical in July, a bourse's spokesperson said late yesterday, adding that neither the Leshan-based company nor its sponsor, Guotai Junan Securities, have responded yet.

Tongda Chemical filed to go public in June, noting that it paid CNY3.3 billion (USD451 million) to shareholders between 2020 and last year but planned to use CNY1.7 billion of the IPO proceeds to settle debts, prompting market doubts. The bourse’s review of the IPO filing has been suspended since last month, pending an update on Tongda Chemical’s financial status.

Tongda Chemical had net profit of CNY4.4 billion in 2021 and last year, and paid out CNY3.3 billion in dividends to cut the debt-to-assets ratio of its controlling shareholder, according to the firm.

Herbicide Glyphosate, a widely used herbicide, is one of Tongda Chemical's main products. The company ranked third globally and second in China by output last year, according to industry data.

The SZSE has strictly reviewed listing applications since it switched to the registration-based system and will continue to do so, the spokesperson noted. Applications withdrawn or denied have accounted for over 40 percent of the total on the bourse's ChiNext market and mainboard in recent years, with more than 100 withdrawn or denied this year, the person said.

China brought in registration-based IPOs across all mainland stock exchanges on Feb. 20. Under the new regime, the Shanghai and Shenzhen bourses are responsible for reviewing IPO filings, and if approved, they then submit relevant documents to the China Securities Regulatory Commission, which has a 20-working-day review window.

Editor: Martin Kadiev