HANOI, Sept 11 (Reuters) - 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 $1.5 billion. The source said the interest was
It is also planning to raise as much as $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 authorized 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 $13 billion and posted half-year revenue of $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 Southeast 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.
S&P Global and Fitch cut their ratings outlook on Vingroup
to negative from stable last year, citing concerns about its
over-reliance on cash-rich property unit Vinhomes to fund its
Vingroup's first-half net profit tumbled 60% to 1.35
trillion dong ($58.26 million). Its shares on the Ho Chi Minh
Stock Exchange have underperformed this year, falling 21%
compared to the benchmark index's 7.6% drop.
Its interest coverage ratio, which indicates the company's
ability to pay off debt, dropped to 3.8 times in the first half
of this year from 5.0 in 2019, according to a copy of an
earnings presentation prepared by Vingroup for potential
investors that was seen by Reuters.
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 $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 $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.
($1 = 23,172.5000 dong)
(Reporting by Phuong Nguyen and James Pearson; Additional
reporting by Anshuman Daga in Singapore and Khanh Vu in Hanoi;
Editing by Muralikumar Anantharaman)