CHINA'S hot pot chain Little Sheep Group Limited closed at its offering price on its debut at the Hong Kong stock exchange yesterday, despite a drop in the morning session.

Shares finished at HK$3.18 (41 US cents) yesterday after opening HK$0.28 lower at HK$2.90 in the morning. It reached the highest of HK$3.40. The Hang Seng Index lost 1.3 percent to 23,023.86.

Inner Mongolia-based Little Sheep is the second domestic dining company to float its shares on the stock market, following China Quanjude (Group) Co, a Beijing-based restaurant chain famous for its roast duck.

The company issued 245 million shares, raising total proceeds of HK$779.7 million before the exercise of the green shoe, also known by its legal title as an "over-allotment option".

The IPO values the company above HK$3 billion, according to a statement from its strategic investor, private equity firm 3i Group Plc.

The IPO received 71 times over-subscription during from June 2 to 5 in Hong Kong.

"The performance of Little Sheep on its first day trading may be affected by the overall sluggish stock market," Hu Xueyan, an analyst at Zhongyuan Securities Co Ltd, said.

"Yet, its prospect is positive since more and more people tend to dine out plus its standard business model."

Little Sheep was earlier reported to postpone the IPO plan due to a financial scandal in Hong Kong.

In June 2006, 3i Group Plc, the biggest publicly traded private-equity company in Europe, teamed up with Prax Capital Management Co to invest a combined US$25 million in Little Sheep for about 25-percent stakes.