Business

What's behind Vingroup $1-billion share offering to foreign investors?

By Minh An March 14, 2019 | 03:49 PM GMT+7

Enterprises are cashing in on positive outlook of the stock market to mobilize capital from shareholders as bond interest rates tend to increase.

Landmark 81 skyscraper developed by Vingroup in Ho Chi Minh City. Photo: Forty Media.

Vietnam's biggest real estate developer Vingroup has announced a plan to increase its charter capital by offering 250 million shares to five foreign institutional investors, aiming to raise at least $1.078 billion.

According to Vingroup, 60 per cent of the proceeds is expected to fund its expanding business and the remaining will be used to pay off loans and due interest.

Investors are considering Vingroup's share issuance as a prompt move to cash in on growing stock market to raise capital for investment expansion and debt repayment.

In addition, the group is also facing the possibility of paying higher interest for bonds in the coming years as some of the bonds have floating interest rates.

Although Vingroup has developed into a multi-sector group, most of its assets and revenue are still generated from the real estate sector. Due to huge investments in real estate projects as well as the multi-billion-dollar VinFast automobile project, which is under construction, Vingroup nearly doubled its debts last year.

Its total loan and debt value increased from over VND51 trillion ($2.2 billion) at the end of 2017 to about VND91 trillion ($3.93 billion) at the end of last year. Of the debts, VN22 trillion ($950 million) came from bond issuance and nearly VND19 trillion ($820 million) are long-term loans.

Over VND19 trillion ($826 million) of debts and short-term loans is due this year and part of the proceeds raised from share offering to foreign investors this year will be used to pay these debts and loans.

In addition, Vingroup will have to pay the interest worth trillions of dongs this year. Last year, due to the increase in debts, the group spent VND4,337 billion ($187 million) to pay interest.

The wave of bond issuance to raise capital in the financial market has developed strongly in recent years, particularly among real estate enterprises.

Reasons behind Vingroup´s plan to raise $1 billion
Bonds sold by TCBS. Unit: Billion VND

Real estate developer Novaland also increased its debts in the form of bonds last year. By the end of 2018, its bonds reached over VND13.8 trillion ($596 million), accounting for around 85 per cent of the group's total debts.

Dat Xanh Group also doubled the value of bonds issued in 2018 to VND2,277 billion ($98 million).

Techcom Securities (TCBS) said that in 2018 it successfully issued nearly VND62 trillion ($2.68 billion) of bonds for large enterprises in Vietnam.

According to fund management company Techcom Capital, the corporate bond market will become bustling this year as giants such as EVN, Masan, Vingroup and Sun Group will continue to issue medium-term bonds of up to hundreds of millions of US dollars. 

Menas brings Da Lat agricultural products to Mena Gourmet Market

Menas brings Da Lat agricultural products to Mena Gourmet Market

Business -  3 day

Menas has recently signed a strategic partnership agreement with Ngoc Duy Group and Da Dream Farm to introduce high-quality agricultural products from Lam Dong province to the nationwide distribution network of Mena Gourmet Market.

MISS EDE debuts in US market with high-quality Vietnamese robusta

MISS EDE debuts in US market with high-quality Vietnamese robusta

Business -  4 day

MISS EDE's recent shipment of 18,000 packages of roasted coffee to the US marks a pivotal step for Dak Lak’s coffee industry toward global recognition.

Desert Harbour Tourism marks 8 years, serves over 20,000 visitors to Dubai

Desert Harbour Tourism marks 8 years, serves over 20,000 visitors to Dubai

Business -  5 day

Desert Harbour Tourism, a Dubai-based destination management company founded by Vietnamese entrepreneurs, has marked its eighth year in operation, having facilitated trips for more than 20,000 visitors, with over 70 per cent coming from Vietnam.

Phu Long partners with 54 to advance Vietnam's golf industry

Phu Long partners with 54 to advance Vietnam's golf industry

Business -  1 week

Phu Long Company and 54, a prominent player in the sports and entertainment industry, have entered a strategic partnership to drive the rapid expansion of Vietnam's burgeoning golf market.

Vietnam's opportunity in a shifting global EV market

Vietnam's opportunity in a shifting global EV market

Business -  2 week

The global electric vehicle boom presents numerous opportunities for Vietnam's economy, supported by leading technology suppliers like Bühler Group.

Maersk expands northern Vietnam operations with first bonded warehouse

Maersk expands northern Vietnam operations with first bonded warehouse

Business -  1 month

A.P. Moller–Maersk has launched its first bonded warehouse in Vietnam, situated in the SLP Park in Nam Dinh Vu Industrial Park, Haiphong.