Concentrate on equitization and divestment in enterprises with large capital scale

Optical fiber manufacturing process at Postal Equipment Joint Stock Company (Postef) of Vietnam Posts and Telecommunications Group. Photo: ST

Equitization, divestment affected by the pandemic

According to the Ministry of Finance, the system of mechanisms and policies on equitization, divestment and restructuring of SOEs has continued to be researched and completed in accordance with the requirements of reality, ensuring publicity and transparency, avoiding loss of capital and property of the State. State-owned enterprises, with a focus on state-owned groups and corporations, continued to be restructured to be more streamlined, playing an important role in the economy, operating effectively, and making important contributions to the state budget.

Regarding the equitization situation, by the end of the 2016-2020 period, there are still 89 enterprises that have not completed the equitization plan under Decision No. 58/2016/QD-TTg, Official Letter No. 991/TTg-DMDN and Decision No. 26/2019/QD-TTg of the Prime Minister. It is expected that these enterprises will continue to carry out equitization as planned, in which, the units that still have many enterprises to equitize such as: Hanoi equitized 13 enterprises (four corporations), accounting for 14% of the plan; Ho Chi Minh City equitized 38 enterprises (11 corporations), accounting for 40% of the plan; The Committee for State Capital Management at Enterprises equitized six enterprises (three Groups, three Corporations), the Ministry of Construction equitized two Corporations.

The Department of Corporate Finance, Ministry of Finance said that in the past five months, they have received reports on approval of equitization plans of three enterprises belonging to Northern Food Corporation and Vietnam Coal and Mineral Industries Group (not under the list of equitized enterprises approved by the Prime Minister) with a total enterprise value of VND252 billion, of which the capital of corporations is VND151 billion. At the same time, the units continue to carry out the work of determining the value of enterprises for equitization in accordance with regulations, specifically: Quang Ngai Investment, Construction and Service Trading One Member Company Limited has a Decision on approving the enterprise value; on February 8, 2021, Power Generation Corporation 2 (EVNGENCO2) had IPO parent company EVENGENCO2; Maritime Pilot Company Limited - TKV is expected to hold an IPO on June 17, 2021.

In term of divestment, in the first five months of 2021, divested capital with a value of VND286.6 billion, earning VND2,165 billion, of which, state capital divestment in three units under Decision No. 908/QD-TTg of the Prime Minister Government has a value of VND52.5 billion, earning VND84.1 billion; regarding to divestment of Groups and Corporations: divested capital at nine enterprises of Vietnam Rubber Group, Viettel Group, Vietnam Education Publishing House, VNPT, Thai Son Corporation with a total value of VND234. 1 billion, earning VND2,081.3 billion.

According to the Ministry of Finance, in the first five months of the year, the work of equitization, divestment and restructuring of SOEs has not achieved many concrete results. Although the domestic and world stock markets have gradually recovered, the implementation of the IPO of EVNGENCO2 did not achieve the results as planned (only sold equivalent to 0.045% of the total expected shares). There are a number of equitized enterprises that have not made equitization settlement in accordance with regulations, have not registered for transactions and listed on the stock market after equitization, thereby affecting the divestment process of enterprises and affecting the collection and payment of money from equitization, divestment of capital to the Enterprise Arrangement And Development Support Fund. The Ministry of Finance expected that in the first six months of the year, the equitization and divestment will not achieve the results because in May the Covid-19 pandemic broke out in many localities of the country, many measures have been applied to cope with the pandemic, in which many localities had to apply social distancing, so this affected the implementation of equitization and divestment.

Focus on large enterprise IPOs in 2021

In terms of revenue from equitization and divestment from the Enterprise Arrangement and Development Support Fund, which is expected to be paid into the state budget, it is expected to collect VND40,000 billion in accordance with Decision No. 1950/QD-TTg on the assignment of state budget estimates in 2021. To complete the above goal, the Ministry of Finance said that it was necessary to focus on equitization and divestment in enterprises with large capital scale. However, the actual revenue depends on the absorption capacity of the market, specifically the needs of investors and the situation of the financial and securities market; in some cases, the offered shares may not be sold or the selling price may not meet expectations.

Regarding equitization, the Ministry of Finance determined that it was necessary to focus on completing the IPO of a number of large enterprises in 2021 such as: Bank for Agriculture and Rural Development - Agribank (expected to collect VND19,847 billion if the State holds 65% of charter capital); parent company of VNPT Group (expected to collect VND30,759 billion if the State holds 51% of charter capital); MobiFone (expected to collect VND9,255 billion if the State holds 51% of charter capital). These are enterprises that must complete equitization under Decision No. 26/QD-TTg in the 2017 – 2020 period. However, the actual revenue of these enterprises still depends on the specific equitization plan, at which point the percentage of state capital sold, the starting price, as well as the market situation, can be determined.

Not only focusing on IPOs of large enterprises, the issue of divestment is also oriented by the Ministry of Finance to focus on divesting capital from large corporations from now until the end of the year. Accordingly, the Ministry proposed to the Prime Minister to direct the Committee for State Capital Management at Enterprises to direct SCIC to focus on divesting capital at Sabeco in 2021 (expected to collect about VND40,169 billion, calculated at the reference price on April 12, 2021 was VND174,000/share), FPT Corporation (expected to collect VND1,982 billion, calculated at the reference price on April 12, 2021 was VND82,100/share) and Bao Joint Stock Corporation Minh (expected to collect VND776 billion, calculated at the reference price on April 12, 2021 was VND25,850/share).

Previously, according to SCIC's announcement, those enterprises would divest in 2021. With a series of large enterprises on this list, the domestic capital market is expected to have attractive and exciting divestment sessions.