Vingroup refocuses on cars, tech and real estate

By REUTERS | 11 September 2020

Labourers producing ventilators amid the spread of Covid-19 at Vsmart factory of Vingroup outside Hanoi last month. — Reuters

HANOI: Vietnam's Vingroup is considering selling controlling stakes in its medical and education units, two sources with direct knowledge said, as the conglomerate exits non-core businesses and fortifies its balance sheet amid a profit slump.

Vingroup, Vietnam’s largest listed firm, could look for buyers for Vinschool, a private school business, and Vinmec, a chain of private hospitals, the sources told Reuters.

The conglomerate has not appointed any advisers for the stake sales so far, but in its informal talks two buyers have shown interest in the two businesses, the sources said.

A third source aware of the matter said Vingroup has received preliminary interest, and the controlling stakes could fetch roughly US$1.5 billion. The source said the interest was rejected.

It is also planning to raise as much as US$1.1 billion in debt before the year-end for refinancing existing debt, one of the sources said.

The company did not respond to a request for comment. The sources declined to be named because they were not authorised to speak to the media.

Vinschool runs 27 educational facilities and Vinmec operates seven hospitals in Vietnam.

The plans are part of moves by Vingroup, which has a market value of US$13 billion and posted half-year revenue of US$1.7 billion, to stem losses in some of its units that have been compounded by the Covid-19 pandemic.

Founded by Vietnam’s richest man, billionaire Pham Nhat Vuong, Vingroup is omnipresent in the South-East Asian country.

Just a year ago, one could be born in a Vinmec hospital, go to Vinschool, live in a Vinhomes apartment and drive to Vinmart in a Vinfast car.

But the group sold Vinmart last year, and with the potential stake sales of Vinschool and Vinmec, Vingroup is quickly scaling back its ambitions.

The expansion over the years, though, has pushed up Vingroup’s debt, and the losses at some of the ventures have squeezed its cash flow.


Automobile gamble

Vingroup scrapped plans to launch Vietnam’s sixth airline, “Vinpearl Air” in January.

Late last year, the group also abandoned moves to form a new unit from its sports, entertainment and hospitality business due to “profitability concerns” of some of the assets, a source with direct knowledge of the plans told Reuters.

It has made real estate, technology and automobiles its key growth focus, but it remains to be seen how the plan shapes up, especially its big bet on cars.

In 2017, Vingroup earmarked US$3.5 billion to create its Vinfast car unit with plans to produce around 250,000 cars annually within the next five years, a period when it does not expect the venture to be profitable.

Last year, Vinfast sold 19,400 cars and 50,000 e-scooters, according to company data. Its net loss ballooned to 6.6 trillion dong in the first half of 2020 from 1.6 trillion dong in the year-ago period.

Vinfast’s latest offering, a gold-trimmed limited edition luxury SUV only available in Vietnam and billed as “the most powerful commercial vehicle in the world” is, at over US$160,000, priced out of reach of most Vietnamese car owners. And its entry-level “Fadil” model is around 13% more expensive than competing models from Kia and Hyundai.

Vinfast equipment, real estate and inventory have all been put up as security for loans with international banks, as have 20 million shares that the company received from Vinhomes, according to its 2019 draft earnings report seen by Reuters.