Guangshen Railway, China's only overseas-listed railway operator, is planning to issue up to 2.75 billion shares in the domestic market to fund its expansion.

The local currency A-share sales, equivalent to 38.81 per cent of the company's enlarged share capital, are scheduled to open for subscription on December 13, the railway firm said in its prospectus.

The proceeds from the initial public offering (IPO) will be channelled to fund its purchase of assets from Yang Cheng Railway, a unit of its State-owned parent company, which include a rail line, Guangshen Railway said.

The acquisition, which costs 10.3 billion yuan (US$1.3 billion), will add 152 kilometres of railway to Guangshen's existing rail line of 329 kilometres, the firm said in the prospectus.

Analysts estimate the IPO will raise about 11 billion yuan (US$1.39 billion) or more if its A share prices are set close to that of its Hong Kong-listed H shares.

"The price range would probably be set between 4 yuan (51 US cents) and 4.5 yuan (57 US cents) per share, if they are set by referring to its H share prices, which were trading around HK$4 (51 US cents) recently," said Li Lei, an analyst with China CITIC Securities.

"It may be even higher, boosted by the recent bullish sentiment on the stock market," the analyst said.

Its H share price closed at HK$3.88 (50 US cents), down 0.77 per cent.

An indicative price range for the IPO will be announced on December 12.

About 25 per cent of Guangshen Railway's IPO, or 687.5 million shares, will be available to institutional investors, with the remaining shares going to retail investors, the railway company said.

Guangshen Railway, which operates trains between Shenzhen and Guangzhou, two major cities in South China's Guangdong Province, is the largest railway operator in South China.

The railway firm, which has American Depository Receipts traded in New York, also runs a rail service, which connects Hong Kong and Guangzhou, with Hong Kong's Kowloon-Canton Railway.

The railway company made a net profit of 434 million yuan (US$55 million) in the first half of this year.

Net profit was 613 million yuan (US$76 million) last year.

Guangshen's IPO will make it the second railway company listed on the domestic stock market.

Daqin Railway, the country's major coal transport railway operator, listed in Shanghai in July, becoming the first railway firm to be listed on the domestic bourse.

Its share price, boosted by Guangshen's IPO news, soared by 7.45 per cent yesterday to close at 7.93 yuan (US$1 dollar).

Guangshen Railway' IPO is the latest A-share issue this year by a large Chinese company listed in Hong Kong, including Bank of China and Air China.

Hong Kong-listed Datang International Power Generation Co, the country's third-largest electricity generator, is also in the process of issuing 500 million local currency shares in Shanghai.

CITIC Securities is the sponsor and lead underwriter of Guangshen's share sale.

Editor: Yan