EV maker VinFast’s losses pile pressure on parent Vingroup as foreign investors sell By Reuters

By Francesco Guarascio and Phuong Nguyen

HANOI (Reuters) – Vietnamese conglomerate Vingroup is facing renewed scrutiny over its plan to prop up loss-making electric car maker VinFast (NASDAQ:), with its shares on the verge of a year-long decline. more as foreign investors sell and their borrowing costs rise.

Pressure on the company, a Vietnamese household name with businesses in transportation, real estate, retail and resorts, intensified this month when Moody’s (NYSE: ) and Fitch issued ratings of ‘junk’ debt in Vingroup’s most profitable unit, the real estate firm. Vinhomes (HM:), along with its projected $500 million in international sales.

The two organizations said that the values ​​of the hypothetical situation are due to the connections of Vinhomes and Vingroup.

This year “could be an indication of Vingroup’s financial health,” said Leif Schneider, head of international law firm Luther in Vietnam.

“Vingroup may face financial erosion” if VinFast’s performance does not improve, he said, adding that reducing Vingroup’s support for subsidies could ease financial pressure.

The consortium and its founder, Pham Nhat Vuong, poured $13.5 billion into the electric car maker since October in loans and grants, and pledged another $3.5 billion billion in November, despite concerns about the bet investors raised at the company’s last annual meeting. .

Vingroup’s market capitalization has halved by nearly $6 billion since VinFast was listed in August 2023. Last year, its shares fell 6.6%, more than the most among the 10 largest companies listed in Vietnam, and underperformed by 7.5% in the rise of Vietnam. market, according to LSEG data.

Its shares traded in December at their lowest level since 2017. They have recovered slightly since but were still close to that multi-year level this week.

“The biggest challenge for Vingroup is still VinFast,” said Nguyen The Minh, head of research at Yuanta Securities Vietnam.

Vingroup, however, is not left behind.

“Vingroup has been continuing to support the development of the facility,” it told Reuters on Wednesday, reiterating its long-term commitment to Nasdaq-listed VinFast.

Strong growth expected for its shares this year will attract investment to the company, Vingroup said.

LEND GOSSIP

So far, investors, especially from overseas, have not been convinced. Since VinFast’s listing, the value of the combined assets of foreigners in Vingroup has fallen by nearly 60% to 15.7 trillion dong ($620.5 million), faster than local investors, according to market data. of stock updated until last week.

Among the foreigners who shed their holdings entirely last year were investment vehicles BlackRock (NYSE: ) and DWS, while JPMorgan’s asset management unit nearly shed its stake to 0.13%, according to LSEG data.

Vingroup’s largest foreign investor, South Korea’s SK Group, plans to sell in mid-February about a fifth of its 6% holding as part of a broader plan to diversify into South Asia- the east.

Vingroup says foreign online sales are a widespread trend in Vietnam and Southeast Asia, largely driven by high interest rates in the United States.

VinFast lost nearly $2 billion in the first three quarters of last year, the latest data show, but it has been paring its losses as revenue grew due to auto sales exceeded its revised target last year.

Vingroup’s revenue and profit rose in the first nine months of last year compared to the same period in 2023, driven by asset sales.

However, Vingroup’s borrowing costs are rising steadily. In May, it issued two-year bonds that paid 12.5% ​​interest, above the average of 10.6% in 2023 and 9.6% in 2022 for slightly longer maturities.

Vingroup did not give details, but Fitch estimated earlier in January that its credit was expected to be close to the risk level for Vinhomes’ ratings “due to increased investment in the group’s car manufacturer, and our expectations for sustainable cash-burning performance”.

“Vingroup’s combined net debt/equity ratio is expected to be above 55% in the short term,” Fitch said, noting that if it were to move above 60% on a sustained basis, that would lead to a decline in current Vinhomes values. , which makes its debt very high.

Vingroup says its debt remains stable.

Vietnam lender Techcombank, one of Vingroup’s biggest lenders, did not respond to a request for comment.

Despite its manageable, subprime debt, “Vinhomes’ credit rating is hampered by its growth ambitions and relationship with its parent, Vingroup,” Moody’s said.