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The rent-a-car of China: eHi Car Services sets terms for $130 million IPO

November 3, 2014

eHi Car Services, a Chinese car rental service with a 15,000+ vehicle fleet in over 90 cities, announced terms for its IPO on Monday. The Shanghai, China-based company plans to raise $130 million by offering 10 million ADSs at a price range of $12 to $14. At the midpoint of the proposed range, eHi Car Services would command a fully diluted market value of $745 million.

Business
eHi Car Services provides both car rentals and car services. Between 2009 and 2013, China's car rental market grew at a 30% CAGR to $4.3 billion, and it is expected to grow to $8.2 billion (18% CAGR) by 2017. It notes the high market fragmentation in China; the top three players have an 11% market share compared to 95% in the US, 48% in Korea and 32% in Japan.

Shareholders
Primary shareholders include Ctrip (NASDAQ: CTRP), Enterprise Rent-a-Car, CDH Investments, Qiming Venture Partners, Goldman Sachs (NYSE: GS), founder and CEO Ray Zhang and Ignition Group. eHi claims that Enterprise shares its operational and industry experience with the company. It also leverages its partnership with Ctrip; the travel agency has integrated eHi's online reservation system on its website since May 2012 and its mobile application since June 2014.

Recent financials
Revenue increased 48% to $62 million for the six months ended June 30, 2014. eHi Car Services' fleet size at quarter-end jumped to 15,400 from 10,600 one year ago and average revenue per available car rose 6% to $26 per day. It also increased its fleet utilization rate by 250 bps to 71%, primarily due to repairs and maintenance during the 1H13. Adjusted EBITDA almost tripled to $21 million due to revenue growth and operating leverage, including lower spending on sales and marketing as well as general and administrative expenses. The company had $143 million of debt at quarter-end.

eHi Car Services, which was founded in 2006 and booked $111 million in sales for the 12 months ended June 30, 2014, plans to list on the NYSE under the symbol EHIC. J.P. Morgan and Goldman Sachs (Asia) are the joint bookrunners on the deal. It is expected to price during the week of November 10, 2014.