Production for export at Viet Tien Garment Company, a subsidiary of Vinatex
According to Vietnam Airlines’ restructuring plan, which has been approved by the government, the national flag carrier will sell 25% to 35% of its stake. After the IPO, the government will continue to hold between 65% and 75% of its VND8.942 trillion (USD428.4 million) in registered capital.
Previously, the carrier only planned to sell between 20% and 30% of its share.
After the IPO, Vietnam Airlines will become a holdings company, with nine units and 26 independent subsidiaries.
The air carrier expects to have a pretax profit of USD1.08 billion and revenues of USD43.5 billion from air transportation alone by 2015.
Along with Vietnam Airlines, nine major corporations under the management of the Ministry of Transport have been requested to conduct their privatisation on time. If not their top leaders would have to be held accountable.
The IPO of Vietnam National Textile and Garment Group (Vinatex) is also expected to attract a lot of investment.
The latest reports showed that all Vinatex subsidiaries have completed their privatisation procedures, but that the holding company will sell its shares to the public for the first time in June 2013.
Information on the debate whether the government should still hold a dominant stake in the group has been neither confirmed nor denied.
An anonymous leader of Vinatex said, as dividend rates in the apparel industry are quite high, from 12%-15% per year, that if Vinatex continues to make profits, it’s not necessary that the government withdraw much of its capital from the group.
Vietnam Building Glass and Ceramics Corporation (Vigracera) plans to hold its IPO in September, planning to sell off 20% of its stakes.
However, privatisation targets were foremost, as an anonymous source from the company said that if demand did not reach expectations, fewer shares would be sold.
In 2012, Viglacera made a pretax profit of VND1.21 trillion (USD58 million) with VND400 billion (USD19.1 million) coming from its holding company.
Dr Nguyen Son, Director of the State Securities Commission of Vietnam’s Market Development Department, said that the IPOs of Vietnam Airlines and Vinatex would create a more attractive market for both domestic and foreign investors.
Challenges
Pham Viet Thanh, Chairman of the carrier’s Consultancy Council said that Vietnam Airlines has selected a joint venture of Morgan Stanley and Citygroup as its consultancy agency for its IPO.
Under their plan, the time for the evaluation of Vietnam Airlines has been fixed to April 1, 2013.
According to Son, the privatisation of state-owned groups and corporations will depend on a number of elements, especially market demand.
This was said in the context of several unsuccessful IPOs of state-owned enterprises.
“If the securities market continues its rebound this year, the IPOs of Vietnam Airlines and Vinatex would be an attractive investment," he said.
The stake sales of several state-owned large companies at the current economic difficulties have stirred public concerns over the acquisition of big companies at low prices, causing losses of the government investment.
Although priviatisation of formerly state-owned companies has caused some concern among the public, economist Vu Dinh Anh said that it is a normal process of adapting to a market economy. "It's necessary to work out mechanisms to incorporate shareholders into state-held enterprises. Privatising these companies will work out to be for the better health of the national economy."