Vinalines has decided to sell the shares planned for strategic investors to the public. (Photo: cafef.vn) Hanoi (VNS/VNA) - Many State-owned enterprises (SOEs) are finding itdifficult to seek strategic investors following equitisation and have decidedto retain the shares or sell them to the public.
Anumber of big State corporations have conducted initial public offerings (IPOs)since the beginning of the year but failed to select strategic investors,including Binh Son Refining and Petrochemical Joint Stock Company (BSR), PVOil, PV Power, Vietnam Rubber Group (VRG) and Power Generation Corporation 3(EVN Genco 3).
Decree126/2017/ND-CP on the equitisation of SOEs, which took effect on January 1,2018, stipulates that shares offered to qualified strategic investors must becompleted after the public offering and before the first general shareholders’meeting.
Inits first general shareholders’ meeting on June 26 this year, PV Powerannounced it would cancel the previously approved strategic investor plan andtransfer these shares to PetroVietnam, which represents the State capital inthe corporation.
PVPower made the public offer on December 31, 2017 but could not select strategicinvestors before its shareholders’ meeting.
Accordingto PV Power Chairman Ho Cong Ky, the four-month period was too short for thecompany to complete its share sale to strategic investors since itsequitisation plan was approved in early December last year.
Thecompany had asked for an extension to July this year but was rejected by theMinistry of Finance. Therefore, the company would not select strategicshareholders, Ky said.
Theentire 28.82-per-cent stake previously intended for strategic investors thuswill be transferred to PetroVietnam. The transfer will lift the State’s shareof capital here to 79.97 percent. PetroVietnam will float these stakes later,following the State capital divestment regulations in a suitable time.
Similarly,PV Oil decided to postpone the strategic investor plan after the Governmentrefused its request for additional time for this sale.
Afterthe IPO on January 25, 2018, PV Oil actively sought strategic investors. Fourinvestors sent confirmation letters to participate in the share auction,including investors from Japan, South Korea and Vietnam.
Toensure the feasibility of the selling process, PV Oil asked the authorities foranother four months to conduct the sale, but the Government said no.
Accordingto Cao Hoai Duong, PV Oil’s General Director, conducting due diligence wouldtake investors a lot of time and money.
EconomistNguyen Tri Hieu agreed that conducting due diligence (the process ofinvestigating a business before signing a contract) takes a lot of time,especially for large SOEs with complex asset structure. He said this processoften takes about one year.
Somealso could not find strategic investors due to the small size of their stakeoffers, such as Vietnam Rubber Group, which planned to sell less than 12 percentto strategic investors. Others struggled to find strategic investors because ofconditions on their business, such as Thanh Le General Import-Export TradingCorporation and Dong Thap Petroleum Trading Import Export Co, whose petroleumtrading is restricted to foreign ownership.
Besidespolicy constraints, the ineffective performance of equitised SOEs makes themunattractive to investors.
Vinalines,which conducted its IPO on September 5, had a time when its cumulative lossesreached 22 trillion VND (944.2 million USD) and was on verge of bankruptcy.After debt structuring and asset liquidation before IPO, it still incurredtotal losses of over 3.25 trillion VND by the end of 2017.
PVOil also suffered a big loss before its IPO and had incurred cumulative lossesof 1.7 trillion VND as of June 30, 2018.
TheIPO of Power Generation Corporation 3 (EVN Genco 3) on February 9 also saw ameasly 3 percent of stakes successfully sold, far below its target of just over12.8 percent. This company had a high debt ratio of about 80 percent of totalassets.
Findingit hard to attract strategic investors, some enterprises opted instead to sellthese shares to the public such as Vinalines and Binh Duong Manufacturing &Import Export Corporation (Protrade).
Accordingto Hieu, Vietnamese Government is working well to manage the macro-economy.However, in order to attract strategic capital, businesses should build stronginner values.-VNS/VNA
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