Prada HK IPO pricing weighed by global risk aversion

Brochures for Prada's global offering are shown during a news conference in Hong Kong June 12, 2011.

HONG KONG (Reuters) - Italian fashion house Prada SpA (1913.HK) pulled out all the stops during meetings with investors around the world for its IPO, which could raise up to $2.3 billion, but reduced risk appetite will likely weigh on the deal as it gets priced on Friday.

In Hong Kong last week, the company hosted a 15-minute fashion show to a packed room of top fund managers who jostled for space at the glitzy Grand Hyatt Hotel to see Miuccia Prada's creations and hear about booming demand for luxury goods in China.

At its home in Milan, the company's management spoke to investors in an office of Prada's Miu Miu brand, its fastest growing line of business that is known for its modern and colorful dresses and handbags.

Despite all the glamour around the IPO, increased volatility in global markets and the poor debut by luggage maker Samsonite (1910.HK) in Hong Kong weighed on the Prada offering, with the company cutting the mid-point of its offering on Thursday.

"The equity market has its own life and may not have anything to do with reality in luxury goods markets," said Selina Sia, head of consumer research at Mirae Asset in Hong Kong.

"Luxury demand is very self explanatory and it makes a lot of sense for companies like Samsonite and Prada to list in Hong Kong, but we're talking about quite a volatile market these days."

The benchmark Hang Seng Index .HSI has declined in 10 of the last 11 sessions, down 7.3 percent, and world stocks .MIWD00000PUS hit a three-month low on Thursday, weighing on investor demand for new stock sales.

Samsonite, the world's largest luggage maker, closed 7.7 percent lower in its debut, after trading nearly 11 percent down early on Thursday.

On top of volatile markets, Prada also had to deal with concerns from fund managers about its rich valuation, and tepid demand from Hong Kong retail investors who were put off by having to pay capital gains taxes in Italy.

Prada filed to sell shares at an indicative price range of HK$36.5 to HK$48 each, before narrowing the range to between HK$39.50 and HK$42.25 a share, according to two sources with knowledge of the deal.

At the top end of its original range, Prada would be trading at 27 times projected 2011 earnings, far higher than an average of 20.4 times for luxury companies including LVMH (LVMH.PA), Hermes International SCA (HRMS.PA), and Cie Financiere Richemont (CFR.VX), according to Phillip Securities forecasts.

At the revised guidance Prada would trade at a P/E of 22.8-24.4 times, more in line with global rivals.

Goldman Sachs (GS.N), Credit Agricole's (CAGR.PA) CLSA brokerage and Italian banks UniCredit SpA (CRDI.MI) and Intesa Sanpaolo's Banca IMI unit, which are both represented on Prada's board, are joint bookrunners and global coordinators of the IPO.

(Reporting by Elzio Barreto; Editing by Muralikumar Anantharaman)