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 company, a household name in Vietnam with businesses spanning autos, real estate, retail and resorts, intensified this month as Moody’s and Fitch gave ‘junk’ ratings to the debt of Vingroup’s most profitable unit, real estate firm Vinhomes, as well as to its planned $500 million international bond sale.
The two agencies said the speculative-grade ratings were due to Vinhomes’ links to Vingroup.
This year “may become 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 does not 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 electric automaker as of October in loans and grants, and promised another nearly $3.5 billion in November, despite concerns about the bet investors raised at the company’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 year, its shares fell 6.6%, the most among the 10 largest listed companies in Vietnam, and underperforming the 7.5% rise for the 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 low level this week.
“The biggest challenge for Vingroup remains VinFast,” said Nguyen The Minh, head of research at Yuanta Securities Vietnam.
Vingroup, however, is not backing off.
“Vingroup has been and will continue 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 year would attract investment in the company, Vingroup said.
BORROWING COSTS
So far, investors, especially from overseas, have been unconvinced. Since VinFast’s listing, the value of foreigners’ combined holdings in Vingroup has dropped by nearly 60% to 15.7 trillion dong ($620.5 million), faster than local investors’, according to stock market data updated to last week.
