By Francesco Guarascio and Phuong Nguyen
HANOI (Reuters) – Vietnamese conglomerate Vingroup faces fresh scrutiny over its strategy to prop up loss-making electric vehicle maker VinFast, with its shares near multi-year lows as foreign investors sell and their borrowing costs rise. .
Pressure on the company, a household name in Vietnam with businesses spanning automobiles, real estate, retail and resorts, intensified this month when Moody’s and Fitch also gave “junk” ratings to the debt of Vingroup’s most profitable unit. , the real estate firm Vinhomes. regarding its planned international bond sale worth $500 million.
The two agencies said the speculative grade ratings were due to Vinhomes’ ties to Vingroup.
This year “may become an indicator of Vingroup’s overall financial health,” said Leif Schneider, director of international law firm Luther in Vietnam.
“Vingroup may face further financial erosion” if VinFast’s performance does not improve, he said, adding that reducing Vingroup’s support for its subsidiaries could mitigate financial strain.
The conglomerate and its founder, Pham Nhat Vuong, invested $13.5 billion in the electric car maker through October in loans and grants, and pledged another nearly $3.5 billion in November, despite concerns about the bet the investors at the company’s last two annual shareholder meetings. .
Vingroup’s market capitalization has nearly halved to about $6 billion since VinFast’s IPO in August 2023. Over the past year, its shares have fallen 6.6%, the biggest drop among the 10 largest listed companies in Vietnam, and underperformed Vietnam’s 7.5% increase. market, according to LSEG data.
Its shares traded in December at their lowest level since 2017. They have recovered slightly since then, but this week they were still near that multi-year low.
“The biggest challenge for Vingroup remains VinFast,” said Nguyen The Minh, head of research at Yuanta Securities Vietnam.
Vingroup, however, is not backing down.
“Vingroup has supported and will continue to support the development of the subsidiary,” he told Reuters on Wednesday, reiterating its long-standing commitment to Nasdaq-listed VinFast.
The strong growth expected for its units this year would attract investments in the company, Vingroup said.
LOAN COSTS
So far, investors, especially foreign ones, have not been convinced. Since VinFast’s IPO, the value of foreigners’ combined stakes in Vingroup has fallen almost 60% to 15.7 trillion dong ($620.5 million), faster than that of local investors, according to stock market data updated last week.