Hong Kong-based Chinese tea retailer Ying Kee Tea House Group is raising HK$48.6 million (US$6.1 million) in an IPO in Hong Kong.

Its retail tranche was oversubscribed by 246 times.

Established 130 years ago, family-owned Ying Kee sells Chinese tea leaves, as well as tea wares and gift sets, including teapots, brewing trays, cups and strainers. It offers more than 70 products of eight types of Chinese tea leaves, with Pu-erh accounting for 40 per cent of revenue for the six months to the end of September.

Ying Kee sells through stores and online, as well as through platforms such as HKTV Mall. Retail outlets, showrooms and concession counters contribute more than 90 per cent of its total revenue.

According to its IPO prospectus, the gross profit margin of tea leaves reached about 79.5 per cent in 2016 and 79.8 per cent last year. Nevertheless, the company had a net loss of $4.19 million for the six months to 30 September, even though revenue climbed by about 7.3 per cent to around HK$16 million, driven by the increase in sales of Pu-erh tea.

CEO Chan Kun-yuen says the purpose of going public is to widen the popularity of Ying Kee. The company has 50 full-time employees and runs 10 retail outlets and concession counters in Hong Kong.

The company plans to use 49.8 per cent of the net proceeds to open a concession counter in a department store in Kwun Tong plus a retail shop in Causeway Bay next year, to be followed by two more retail shops in Sha Tin and Yuen Long in 2020.

About 13.4 per cent of the IPO funds will be used to upgrade the company’s information system, while 15 per cent will repay bank borrowings.

Ying Kee had 12.6 per cent share of the specialist Chinese tea retailers market in Hong Kong in terms of revenue in 2016. It offered 90 million shares and set its IPO price at between 48 and 54 cents a share. Trading will start next Monday.