China Auto Rental successfully launched a US$468m initial public offering (IPO) in the Hong Kong stock market, backed by private equity firm Warburg Pincus and Hertz Global Holdings.

The rental firm plans to use around 70% of the proceeds of the IPO to expand its fleet of vehicles in China to buy up to 60,000 vehicles, more than doubling the fleet of 55,000 cars it owned at the end of March 2014.

The company said 20% of the funds raised will go to pay down debt and the remaining 10% would be used as working capital.

The company believes the car rental market in China will almost double in size to close to US$11bn by 2018, with car ownership restrictions imposed by some of the country’s municipalities helping to fuel demand. 

Significant growth is expected to come from the short-term/daily rental segment in China. Long-term rentals, of more than 90 days and involving mostly corporate contracts, account for 60% of the total market at present but growth is now slower than that for short-term rentals.