Conglomerate supports VinFast with asset sales and plans for IPOs
Vincom Retail is one of the group's best earners, posting net profits of 4.4 trillion dong last year. (Photo by Yuji Nitta)
YUJI NITTA, Nikkei staff writer
June 7, 2024 05:36 JST
HANOI -- Vietnamese conglomerate Vingroup is selling off main businesses and planning stock market listings in a scramble to raise funds for its loss-making VinFast EV business, raising concerns about the group's future cash flow.
Vingroup is moving forward with plans to sell Vincom Retail, which operates large commercial facilities in over 80 locations across Vietnam, many of which are located in prime locations on busy thoroughfares.
Vincom Retail's earnings have been strong, posting a net profit of 4.4 trillion dong ($173 million) in 2023, up 60% from the previous year.
Vingroup's wholly owned subsidiary, SDI Trading Development and Investment, had indirectly held 41.5% of Vincom Retail's shares. As of the end of March, Vingroup had sold 55% of its SDI shares to four companies and is expected to sell the remaining 45% by year's end. The total transfer price is estimated to be $1.5 billion.
In addition to its prized retail arm, Vingroup in 2019 sold supermarket operator VinCommerce to local food giant Masan Group.
Vingroup also plans to list luxury resort subsidiary Vinpearl on the stock market as early as this year. The group could eventually sell its shares in the company.
"We will never give up on VinFast go," said Vingroup founder Pham Nhat Vuong at an April shareholders meeting in Hanoi, emphasizing that the group was heading in the right direction with its EV focus.
VinFast sold 9,689 electric vehicles in the January-to-March period, up 5.4-fold on the year. Cumulative sales since 2021 have reached 50,000 units. The company is planning to build factories in India and Indonesia, with 2024 investments expected to exceed $1 billion.
Vuong, the richest person in Vietnam, built his assets from an instant noodle business he started in Ukraine in 1993. He has been expanding businesses in Vietnam since 2000.
He found success in developing housing and resorts and also branched out into retail chains equipped with cooler and freezer capabilities, as well as smartphone manufacturing. His group also operates schools and general hospitals.
Vingroup has kept pace with Vietnam's economic growth and helped support the Vietnamese people's desire for a more comfortable lifestyle. The company has said it believes EVs can further improve people's lives and that Vietnamese people wish for a globally recognized automobile brand.
Vingroup is putting the efforts of group businesses together to boost VinFast's sales. Real estate developer and core business, Vinhomes, is distributing coupons to homebuyers that can be used to purchase VinFast EVs, providing discounts of up to 350 million dong. In 2023, nearly 15% of VinFast's EV sales were from coupon-linked purchases.
About 70% of the EVs sold by VinFast in 2023 were to the group's taxi company GSM. (Photo by Yuji Nitta)
Green and Smart Mobility (GSM), an EV taxi company in which Vuong personally invested, is also supporting sales. About 70% of the EVs sold by VinFast in 2023 were to GSM, and more than 80% of its sales are believed to originate from the group's support.
Vuong has pledged to give $2 billion of his own money to VinFast. In January, he transferred his shares in battery manufacturer VinES to VinFast, which will help reduce EV production costs.
In March, VinFast spun off its charging station business to place it under a company led by Vuong. He plans to invest 10 trillion dong over the next two years to build up the charging network.
With an investment scale for the charging station business about three times that of VinFast's, Vingroup is rushing to lay the foundation for the spread of EVs.
Such an all-out push of the EV business has raised concerns. During the April shareholders meeting, Vuong dismissed concerns about Vingroup's cash flow as "unfounded."
But the losses in the manufacturing division, including EVs, continue to eat up the earnings from real estate. The group managed to generate a net profit for the year ended in December thanks to Vuong's personal funds. But a look at its cash flow shows it is spending more than it takes in.
Operating cash flow for the year ended December was negative by 20 trillion dong, and free cash flow, which includes investment cash flow, is approaching negative 50 trillion dong.
The company is reportedly in discussions to secure funds for or refinance 85% of its debt due by the end of the year. An agreement has already been reached with investors to extend the redemption of some of its U.S. dollar-denominated bonds.
Concerns linger about the quality of its EVs. Four recalls occurred between 2022, when EV sales began in earnest, and February this year. A total of more than 11,000 vehicles were recalled, equivalent to nearly one in five EVs sold. Perhaps in response to the slowdown in the EV market, reports have begun to circulate that completion of its U.S. plant will be postponed.
Some shareholders of listed group units like Vinhomes have been left wondering if their company is lending funds to the EV business.
MPR TÓM TẮT BẢN TIN
- Bán Vincom Retail: Vingroup đang tiến hành bán Vincom Retail, công ty điều hành các cơ sở thương mại lớn tại hơn 80 địa điểm trên khắp Việt Nam, với lợi nhuận ròng 4.4 nghìn tỷ đồng vào năm 20231.
- Kế hoạch IPO: Vingroup cũng có kế hoạch niêm yết Vinpearl, công ty con chuyên về khu nghỉ dưỡng cao cấp, trên thị trường chứng khoán vào cuối năm nay.
- Tập trung vào VinFast: Để tập trung nguồn lực cho VinFast, công ty sản xuất xe điện đang lỗ, Vingroup đã bán một số doanh nghiệp chính và lên kế hoạch niêm yết cổ phiếu.
- Hỗ trợ từ GSM: Khoảng 70% xe điện VinFast bán ra trong năm 2023 là cho công ty taxi điện GSM, và Phạm Nhật Vượng, người sáng lập Vingroup, đã cam kết đầu tư 2 tỷ USD của cá nhân vào VinFast.
