EV maker VinFast’s losses heap pressure on parent Vingroup as foreign investors sell

By Francesco Guarascio and Phuong Nguyen

HANOI (Reuters) – Vietnamese conglomerate Vingroup is facing renewed scrutiny on its strategy of backing loss-making electric vehicle maker VinFast, with its shares near multi-year lows as foreign investors sell and its borrowing costs rise.

Pressure on the corporate, a household name in Vietnam with businesses spanning autos, real estate, retail and resorts, intensified this month as Moody’s and Fitch gave ‘junk’ rankings to the debt of Vingroup’s most profitable unit, real estate firm Vinhomes, in addition to to its planned $500 million international bond sale.

The 2 agencies said the speculative-grade rankings were resulting from Vinhomes’ links to Vingroup.

This yr “may develop into indicative of Vingroup’s broader financial health,” said Leif Schneider, head of international law firm Luther in Vietnam.

“Vingroup may face further financial erosion” if VinFast’s performance doesn’t improve, he said, adding that scaling back Vingroup’s support to subsidiaries could mitigate financial strain.

The conglomerate and its founder, Pham Nhat Vuong, poured $13.5 billion into the electrical automaker as of October in loans and grants, and promised one other nearly $3.5 billion in November, despite concerns in regards to the bet investors raised at the corporate’s last two annual shareholders’ meetings.

Vingroup’s market capitalisation has shrunk by nearly half to about $6 billion since VinFast’s listing in August 2023. Over the past yr, its shares fell 6.6%, probably the most among the many 10 largest listed firms in Vietnam, and underperforming the 7.5% rise for the Vietnam market, in keeping with LSEG data.

Its shares traded in December at their lowest level since 2017. They’ve recovered barely since but were still near that multi-year low level this week.

“The most important challenge for Vingroup stays VinFast,” said Nguyen The Minh, head of research at Yuanta Securities Vietnam.

Vingroup, nevertheless, just isn’t backing off.

“Vingroup has been and can proceed to support the subsidiary’s development,” it told Reuters on Wednesday, reiterating its long-standing commitment to Nasdaq-listed VinFast.

Strong expected growth for its units this yr would attract investment in the corporate, Vingroup said.

BORROWING COSTS

Up to now, investors, especially from overseas, have been unconvinced. Since VinFast’s listing, the worth of foreigners’ combined holdings in Vingroup has dropped by nearly 60% to fifteen.7 trillion dong ($620.5 million), faster than local investors’, in keeping with stock market data updated to last week.

Amongst foreigners who fully divested their holdings within the conglomerate last yr are investment vehicles of BlackRock and DWS, while JPMorgan’s asset management unit nearly halved its stake to 0.13%, in keeping with LSEG data.

Vingroup’s largest foreign investor, South Korean conglomerate SK Group, is planning to sell by mid-February about one-fifth of its 6% holding as a part of a possibly broader divestment plan in Southeast Asia.

Vingroup said foreigners’ net selling was a wider trend in Vietnam and Southeast Asia, driven largely by high rates of interest in the USA.

VinFast lost nearly $2 billion in the primary three quarters of last yr, latest data show, but is narrowing its losses as revenue grew because of automotive sales having exceeded its revised-down goal last yr.

Vingroup’s revenue and profits rose in the primary nine months of last yr in comparison with the identical period in 2023, driven by the sale of assets.

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

Vingroup just isn’t rated, but Fitch estimated earlier in January that its debt was expected to be near risk levels for Vinhomes’ rankings “resulting from rising investments within the group’s automaker, and our expectations of a sustained operating money burn”.

“Consolidated net debt/net property assets at Vingroup is anticipated to be above 55% over the short term,” Fitch said, noting that if it moved beyond 60% on a sustained basis, that may lead to the downgrade of Vinhomes’ current rating, making its debt costlier.

Vingroup said its debt remained at stable levels.

Vietnamese lender Techcombank, which is considered one of Vingroup’s largest creditors, didn’t reply to a request for comment.

Despite having a manageable, low debt, “Vinhomes’ credit quality is constrained by its growth ambitions and linkages with its parent, Vingroup,” Moody’s said.

(Reporting by Francesco Guarascio and Phuong Nguyen; Editing by Muralikumar Anantharaman)

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EV maker VinFast’s losses heap pressure on parent Vingroup as foreign investors sell

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