China Auto Rental, the largest vehicle-leasing agency in the country by fleet size number, has confirmed the delay of its US IPO after failing to draw enough investor demand. No new date for the offering has been given by the company.

China Auto Rental would have been the second US IPO by a Chinese company after the weak début last month of Vipshop Holdings, an online fashion retailer in China, which had priced its shares much lower than the indicative range.

The delay of China Auto Rental indicates the investing community’s concerns about the corporate governance standards of privately owned Chinese companies. Investors remain cautious about investing in Chinese IPOs amid market volatility.

China Auto Rental was seeking to raise as much as US$137.5 million by offering 11 million American depositary receipts (ADRs). It was going to use the proceeds to fund vehicle acquisitions and for debt repayments.

With a network of 520 service locations, China Auto Rental has a rental fleet of about 26,000 vehicles, growing rapidly from only 692 vehicles by the end of 2009. The fleet is about 4× that of the second largest car rental company in China as of end-2011, according to China Auto Rental’s prospectus, citing German consultancy firm Roland Berger.

It posted net losses of 3.2 million renminbi (US$507,936), 43.3 million renminbi and 151.4 million renminbi for 2009, 2010 and 2011 respectively. The losses, however, came at the back of increasing revenue, which has grown from 54 million renminbi in 2009 to 143 million renminbi in 2010 and 775.8 million renminbi in 2011.

Bank of America Merrill Lynch, J.P. Morgan and Morgan Stanley were the joint bookrunners for the transaction. – AL