Foreign investors sell off EV maker VinFast, losses put pressure on parent Vingroup

Vingroup shares near multi-year lows, biggest faller among Vietnam’s top companies

Vingroup’s market value has almost halved since VinFast’s Nasdaq listing

Agencies rate debt of Vingroup’s most profitable unit junk

Vingroup says it remains committed to VinFast’s growth

Author: Francesco Guarascio and Phuong Nguyen

HANOI, Jan 23 (Reuters) – Vietnamese conglomerate Vingroup faces renewed scrutiny over its strategy to back loss-making electric car maker VinFast, which has seen its shares near multi-year lows as foreign investors sell off and borrowing costs rise.

The pressure on the company, a household name in Vietnam with interests in cars, real estate, retail and resorts, intensified this month when Moody’s and Fitch rated the debt of Vingroup’s most profitable subsidiary, real estate company Vinhomes. For “junk level”. on its planned $500 million international bond issuance.

The two agencies said the speculative-grade rating was due to Vinhomes’ ties to Vingroup.

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

If VinFast’s performance does not improve, “Vingroup could face further financial erosion,” he said, adding that reducing Vingroup’s support for the subsidiary could ease financial pressure.

The group and its founder Pham Nhat Vuong have pumped $13.5 billion in loans and grants into the electric car maker through October and pledged to inject nearly $3.5 billion more in November, despite investor concerns about the company. Bets at the last two annual general meetings are worrying.

Since VinFast went public in August 2023, Vingroup’s market value has shrunk by nearly half to about $6 billion. Its share price has fallen 6.6% over the past year, the largest decline among Vietnam’s 10 largest listed companies, underperforming the Vietnamese stock market’s 7.5% gain, according to London Stock Exchange data.

Its shares hit their lowest level since 2017 in December. It has since recovered slightly but remains near multi-year lows this week.

“The biggest challenge facing Vingroup remains VinFast,” said Nguyen The Minh, head of Vietnam research at Yuanta Securities.

However, Vingroup is not backing down.

“Vingroup has always and will continue to support the development of this subsidiary,” Vingroup told Reuters on Wednesday, reaffirming its long-term commitment to Nasdaq-listed VinFast.

Vingroup said strong expected growth in its business unit this year will attract investment in the company.

So far, investors, especially overseas, have not been convinced. According to stock market data updated last week, the total value of foreign holdings in Vingroup has fallen by nearly 60% to 15.7 trillion Vietnamese dong ($620.5 million) since VinFast went public, falling faster than local investors.

Investment vehicles such as BlackRock and DWS were among the foreigners who sold out of the group last year, while JPMorgan Asset Management’s stake almost halved to 0.13%, London Stock Exchange data showed. .

Vingroup’s largest foreign investor, South Korean conglomerate SK Group, plans to sell about a fifth of its 6% stake by mid-February as part of a potentially wider divestment plan in Southeast Asia.

Vingroup said the net selling by foreigners was part of a broader trend in Vietnam and Southeast Asia, driven primarily by high U.S. interest rates.

The latest data shows that VinFast lost nearly $2 billion in the first three quarters of last year, but the losses are narrowing as vehicle sales exceeded last year’s revised target and revenue grew.

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

However, Vingroup’s borrowing costs have been rising steadily. In May, it issued a two-year bond with an interest rate of 12.5%, which was higher than the 2023 average rate of 10.6% and the slightly longer 2022 average rate of 9.6%.

Vingroup is not yet rated, but Fitch estimated earlier in January that its debt was expected to be close to the risk level of Vinhomes’ rating “due to rising investments in the group’s automakers and our expectations of ongoing operating cash burn” .

Fitch said it “expects Vingroup’s consolidated net debt/net real estate assets to exceed 55% in the near term,” noting that a sustained increase above 60% could result in a downgrade of Vinhomes’ current rating, making its debt more costly.

Vingroup said its debt remains at a stable level.

Vietnamese bank Techcombank, one of Vingroup’s largest creditors, did not respond to a request for comment.

Moody’s said that while debt is manageable and low, “Vinhomes’ credit quality is constrained by its growth ambitions and its linkage to its parent Vingroup”.

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