Why is equitization slow? The construction sector is still clutter

In the plan, Song Da Corporation will be implemented IPO in the third quarter 2017. Picture: H.Anh.

These are the leading enterprises of the Ministry of Construction with a lot of assets and values. Thus, equitization of these 4 enterprizes is not easy, and the fact, the process of these enterprizes' equitization has been delayed for times.

Implement IPO at Song Da Corporation and IDICO in the third quarter

The equitization of SOEs in the construction sector is scheduled to be completed in 2015, however, for a number of reasons, SOE equitization has not been completed yet.

The Ministry of Construction is assigned to be the representatives of state capital owners at 16 corporations, of which, by the end of 2016, 12 corporations have been transformed into joint stock companies such as FICO JSC, Song Hong JSC, Investment and Construction Development JSC, Hanoi Construction JSC, Bach Dang Construction JSC, Vietnam Water and Environment Investment JSC, Vietnam Construction Consultancy JSC, Construction Machinery Corporation JSC... At present, there are 4 big SOEs that must continue to complete equitization in 2017, including Housing and Urban Development Corporation (HUD), Vietnam Industry Cement Corporation (VICEM), IDICO Urban and House Development (IDICO) and Song Da Corporation. According to representatives of the Ministry of Construction, so far, 2 in 4 corporations are Song Da and IDICO’s equitization plans were approved by the Prime Minister in early June 2017.

According to the IDICO’s equitization plan approved by the Prime Minister, the IDICO’s equitization will be conducted under the form of combining the sale of the capital share and issuing additional shares to increase charter capital. IDICO will have a charter capital of 3,000 billion vnd, the initial shareholding structure of 300 million shares (with a par value of 10,000 vnd/share), of which 135 million shares will be sold to strategic investors (Accounting for 45% of charter capital). The number of preferred shares sold to its employees is nearly 1.7 million shares (accounting for 0.56% of charter capital) and more than 55 million shares will be auctioned publicly. The state capital is 108 million shares (accounting for 36% of charter capital as by December 31, 2018), after this time, it continues to sell out the remaining state capital.

For Song Da Corporation, this form of equalization is similar to that of IDICO. However, the charter capital of Song Da Corp approved is 4,500 billion vnd. Under the approved plan, the State will hold up to 51% of Song Da's charter capital with 229.5 million shares by the end of 2019. The shares will be sold off, and the shares held by the State will be reduced to under 50% of charter capital after 2020. Strategic investors will have the opportunity to buy 135 million shares in the enterprise, equivalent to 30% of charter capital. After 2019, the Ministry of Construction will have to transfer ownership of state capital in Song Da to SCIC.

Speaking to the press, a representative of the Department of Enterprise Management, Ministry of Construction said that the Ministry of Construction is currently acting as owner representative has been completing the next work of the equitization process and is currently completing the work of the equitization process and preparing for the IPO plans of the 2 companies. It is expected that the implementation of IPO at Song Da and IDICO will be conducted in September 2017, while the Ministry of Construction and other enterprizes will prepare other works to organize the first shareholders' meeting.

Strive to finish on time?

Thus, the construction industry still has 2 corporations are VICEM and HUD that is in the process of completing the steps to be approved equalization. According to Mr. Nguyen Viet Hung, Chief of Office of the Ministry of Construction, for the HUD, the Ministry of Construction is submitting the equitization plan; and for the VICEM, the Ministry is currently in the process of determining the value of the enterprise.

Under the equitization plan, the VICEM’s equitization should have been carried out in the fourth quarter of 2016 after being delayed several times as the enterprise's equitization must tie with the restructuring of debts of Song Thao Cement Company (belongs to the HUD) and Ha Lòn Cement company (of Song Da Corporation) under the decision of the Prime Minister. The handling of financial problems of the two cement companies is facing many difficulties, leading to the delays in the equitization process of must be rescheduled by the end of 2017.

In order to speed up the VICEM equitization process, in the newly- approved plan, Deputy Prime Minister Vuong Dinh Hue asked the Ministry of Construction to direct Song Da Corporation to cooperate with VICEM, Ha Long Cement JSC, or other relevant partners to commit and complete the timely implementation of the repayment of debts to foreign banks and debt consolidation funds under the Ministry of Finance, which Song Da Corporation is the debt recipient, continue to deal with financial problems, disclose information about equitized enterprises, transfer the Song Da Corporation into joint stock company in accordance with the law.

About the HUD’s equitization, the proposal of the Ministry of Construction for the company’s equitization plan shows many inadequacies. In a document sent to the Government Office, the Ministry of Plan and Investment has opposed many proposals of the Ministry of Construction. For example, about the Ministry of Construction’s proposal to sell 25% of HUD shares to its strategic investors, the Ministry of Plan and Investment emphasizes that HUD is a Vietnam’s leading enterprise in the field of housing and real estate, thus, it is unnecessary to have strategic investors.

Besides, the Ministry of Planning and Investment also disagreed with the proposal of the Ministry of Construction to allow to take the results of the enterprise’s value on December 31, 2014 to define the price in IPO as the time distance between publicizing the enterprise’s value and IPO are over 18 months, also requested the Prime Minister for permission to collaborate with the State Audit for reviewing, adding the value of the enterprise at the latest time to ensure the adequacy of land value, avoid losing to the State. About the stock prices and divestment plan, in the decision of the Ministry of Finance in 2016, the value of HUD as the day of December 31, 2014, was 10,900 billion vnd, in which the State capital was over 3,400 billion vnd.

More about this issue, a representative of the Department of Enterprises Management, the Ministry of Construction submitted the HUD’s equitization plan to the Prime Minister in April 2017, however, due to owning a lot of projects with large land, after consulting other ministries and branches on the HUD’s equitization plan, the Prime Minister has requested the Ministry to continue to review, inspect the changes in real estate, value of its projects, on the basis, the Prime Minister will consider making decision.

It is expected in August 2017, the Ministry of Construction will report and submit to the Prime Minister about the enterprize’s equitization plan. Share more about the difficulties in the equitization process of these 4 corporations, the representative of the Ministry of Construction said that the size of capital and assets of these corporations is very large, accounting for 80% of the value of capital and assets of 16 SOEs in the construction sector. With this scale, valuation of assets is very difficult and complex. To properly calculate the value of enterprizes, ensure transparency, the Ministry of Construction has coordinated with state agencies to complete, inspect and review before announcing equitization plan and implementing.

The representative of the Ministry of Construction also said that the Ministry of Construction will basically complete equitization with these 4 companies in 2017. In particular, it will hold auctions, share issuance, shareholders meeting for the first time to transfer IDICO, Song Da Corporation into JSC in the third quarter and HUD in the fourth quarter of 2017. About approving of enterprises’ value and submitting the VICEM equitization plan to the Prime Minister, the Ministry will also conduct in the fourth quarter of 2017. In addition, for the rest of 2017, the Ministry of Construction will finalize and hand over state capital to joint stock companies for corporations that have completed equitization, review, make a commitment for corporations to divest, increase and reduce capital in their subsidiaries and affiliated companies according to the approved plan.

The Ministry of Construction has submitted the HUD equitization plan to the Prime Minister in April, 2017, however, with the specific characteristics of the company as owning many projects with a large area of land. Thus, after consulting ministries on the HUD equitization plan, the Prime Minister asked the ministry to continue reviewing and re-checking the situation of changes in land assets and value of projects, on the basis, the Prime Minister will consider to make decision. It is expected that in August, the Ministry of Construction will report and submit the equitisation plan to the Prime Minister.