Rongda has finger on the pulse

What's the best place to visit in Bejiing if you want to take the temperature of China's capital market? Perhaps it's Beijing's CBD or the city's Financial Street.

If you think so, then you'd be mistaken. In fact, the best location is an unassuming building in the city's Muxidi area that's home to a print shop.

This four-story structure belongs to Beijing Rongda Weiye Trading Co Ltd, a company that specializes in printing IPO application materials, and has almost monopolized the business nationwide.

Representatives from companies planning listings, securities firms and law firms are a common sight at Rongda's headquarters, where they meet to discuss the materials they are going to present to the China Securities Regulatory Commission, the country's top stock market regulator.

These materials may determine whether a company can be listed and cash in on the expanding financing market.

According to local media, Rongda has a 90 percent share of the IPO application materials printing market, but the company refused to comment on this figure when contacted by China Daily.

Rongda is commonly known in securities-related circles and has a predominant position in this niche market.

When it comes to printing IPO materials, Rongda is the first choice, many company representatives said.

With such a dominant role in the business, it is not surprising that it has been dubbed a "barometer" of China's stock market.

"If Rongda's light is turned on all night, China's capital market is probably fine; if not, be alert," said Zhang Yabo, a former manager at a securities firm.

Clues to success

At first glance, the printing company, operating from a 1980s-style building surrounded by modern high rises, does not resemble an industry miracle.

Print workers in gray uniforms hustle up and down the stairway while dark-suited businessmen wait in the small lobby.

But deeper inside the building lies clues to Rongda's success.

The second and third floors are divided into small reception rooms.

Inside are three separate spaces divided by opaque glass doors. It is here and in other larger VIP rooms that IPO application materials are discussed, revised and examined.

Clients can eat, drink and even sleep at Rongda, all without charge. There are even massage armchairs for tired clients.

But all of this is strictly off-limits to outsiders, and Rongda does not accept any media inquiries.

Corporations and securities traders say Rongda's professionalism and long experience are the reasons they opt for this low-key print shop.

"I always look for a senior print worker there to do the job," said Ma Zhi, a manager at Guangzhou-based GF Securities, who has used Rongda's services several times.

"They are experienced and efficient. They do it really fast."

Indeed, efficiency is a major requirement for corporations and securities brokers.

"Usually we go to Rongda three to five days before the (submission) deadline. We spend a great deal of time compiling and sorting out the material. So there really is not much time left for printing," Zhang said.

"If we miss the deadline, we have to wait another three months or longer. Then we'll have to add the latest information. That is an unbearable cost."

Actually, applying for an IPO is a complicated process involving several phases, each of which requires corresponding materials to be submitted to the CSRC.

The CSRC has very strict rules, with specific requirements regarding the catalog, pagination, the font and even the type of paper used.

"Rongda's workers are extremely familiar with these rules because it's their only business," said Ma.

"We also know these rules but Rongda's employees can often point out faults in the document that we didn't notice."

"Going public is a big thing. We couldn't afford any lapse," Ma said. A minor lapse could lead to the immediate rejection of the materials.

But it still puzzles outsiders why Rongda could hold such an overwhelming market share. After all, its expertise and experience in this area would not be too hard to duplicate.

One factor, according to Ma, is that corporations need their materials printed in Beijing, as that is where the CSRC is located. As a result, it's difficult for print companies elsewhere to get a slice of the action.

Another factor is simply not wanting to be seen as an outsider.

Hao Baogui, general manager of Smartop Co Ltd, a rival printing company, said: "People are so familiar with Rongda that the brand has become 'semi-official' in industry circles. If nine out of 10 securities brokers bring their application materials to the CSRC with a Rongda-tagged bag, can you dare carry another bag?"

Daring challenger

But these factors have not deterred Smartop, which is keen to get a slice of this lucrative market.

Smartop, which specializes in printing brochures, posters, handbooks and other documents for corporations, launched its IPO-related printing business in 2011 in an effort to complete its service portfolio.

So far, it is the only company that has dared to take on Rongda.

What attracts Smartop is the high gross margin, which could reach 45 to 50 percent, according to Yang Wenyu, a manager at the company.

According to Yang, if a company's application is successful, it could pay around 150,000 yuan ($23,800) to the print shop. With around 300 companies in China likely to launch IPOs, that means rich pickings for printing companies - as much as 45 million yuan.

A total of 281 companies went public in China's stock market in 2011. The figure in 2010 was 347.

And companies trying again after failing first time around to launch IPOs could take that figure even higher.

Although it has proven difficult to convince securities brokers to risk switching to Smartop, the company has managed to persuade some of its old clients to give it their IPO business.

Another opportunity Smartop can take advantage of is Rongda's limited reception capacity. At the end of every quarter, especially at the end of March, Rongda's headquarters is crowded, as securities firms rush to submit IPO materials at this time.

Ma said appointments cannot be made at this time and clients are seen on a "first come first served" basis.

"Here, clients don't have to wait," said Yang from Smartop.

Hao, Smartop's general manager, said the expected growth in the number of companies launching IPOs would provide enough opportunities for his business to grow.

The establishment of a second board in 2009 has already boosted Rongda's business.

But Yang said even the existing market offered a bright future for Smartop.

"There are 300 companies waiting to go public. We can do alright as long as we carefully cultivate the existing market."