Vietnam National Textile and Garment Group (Vinatex) has said it will rely on dividends from its affiliates and associate companies as a main source of income after it undergoes equitisation even though it will heavily invest in material production, the Saigon Times Daily reported.

BIDV Securities Company (BSC), the consultant for Vinatex’s initial public offering (IPO), announced a report at a road show of Vinatex in Ho Chi Minh City on July 4, saying Vinatex will invest 3.4 trillion VND in eight fiber projects in 2013-2017 and 6 trillion VND in nine fabric projects in 2014-2017.

The country’s leading textile and garment firm is looking to obtain revenue of nearly 1.9 trillion VND this year and boost it to nearly 8.7 trillion VND in 2016.

However, Vinatex estimates low gross profit, at only 80 billion VND this year, 197 billion VND in 2015 and 313 billion VND in 2016. Its after-tax profit is projected to rise from 300 billion VND in 2014 to 562 billion VND in 2016, buoyed by dividends from its affiliates and associate companies.

Le Tien Truong, Deputy General Director of Vinatex, said Vinatex’s strategy is to invest in material manufacturing plants, which will mainly supply its affiliates and associate companies in the original design manufacturer (ODM) chain.

This will help the industry meet the Yarn Forward requirement in the Trans Pacific Partnership agreement, which Vietnam is expected to sign with 10 other Pacific Rim countries – the United States, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Japan.

For instance, Viet Tien is a major shirt producer in the country but it has to import 70 percent of its cloth needs. Vinatex’s forthcoming cloth production factories will supply companies like Viet Tien, making it possible for those firms to sign ODM contracts with customers from the TPP countries, Truong explained.

Therefore, Vinatex’s investment in material plants will see low risk as it will not compete with other material providers.

As per the report, the parent firm Vinatex obtained 116 billion VND in revenue last year. The figure included those from only three units.

Financial investments have always made up a large contribution to Vinatex’s revenues, including dividends from member companies and deposit interest sums. Last year it earned 423 billion VND from financial investments, including 322 billion VND worth of dividends.

Viet Tien contributed the biggest dividend with 67 billion VND, followed by Viet Thang with 29.6 billion VND and Phong Phu with 48.1 billion VND. Vinatex had had 38 units as of end-2013.

The garment giant’s IPO would be implemented on the Ho Chi Minh Stock Exchange on July 22 with nearly 122 million shares out of 500 million shares. With an initial price of 11,000 VND per share, the IPO is expected to raise 1.22 trillion VND.-VNA