Big businesses wallow in “mountains of cash”

Big businesses wallow in “mountains of cash”

While the majority of businesses are thirsty for capital to maintain their production, the remaining weep because they have too much excess money.

It is estimated that tens of trillions of dong have been kept in businesses’ coffers, while hundreds of trillions of dong still cannot be disbursed by banks. The capital flow has gotten stuck because investors nowadays cannot find investment channels that are attractive enough.

Sitting on mountains of cash

The Kim Long Securities Company (KLS) reportedly had over VND850 billion in cash by the end of 2013. “This is a big sum of money, but it just accounts for 1/3 of our capital. We are considering the situation carefully to make reasonable investment decisions,” a senior executive said.

Bao Viet, a finance group, had reported its amount of cash soaring from VND4.0 trillion at the end of 2012 to VND7.5 trillion by the end of 2013.

Many other businesses are also finding it difficult to make their money work for them due to sharp bank deposit interest rate reductions. The ceiling deposit interest rate has been lowered from 7 percent to 6 percent per annum, while it is expected to decrease further in the future.

In principle, businesses can make quick profits by injecting money into securities. However, they are not financially professional enough to take risks with securities. A lot of big groups have tasted bitterness with their investment deals in securities and real estate projects.

PVGAS, a gas corporation, has reported its idle capital jumping from VND12.7 trillion at the end of 2012 to VND18.3 trillion by the end of last year, which included VND2.9 trillion in cash.

A series of other enterprises also reportedly had plenty of money by the end of 2013: PVD with VND2.6 trillion, including VND940 billion in cash, DPM with VND436 billion in cash and DHG with VND613 billion.

Commercial banks also have to “struggle” with the overabundance of capital. Since they cannot find good clients to whom to lend money, they have poured funds into government bonds.

Tien Phong newspaper quoted a Hanoi Stock Exchange report as saying that in February alone, over VND25 trillion worth of funds were raised through seven government bond bids.

Where to put redundant money?

“Big bosses” really feel embarrassed with the big money they have in their coffers.

Some have decided to offer higher dividends to shareholders. DPM, for example, plans to offer a 50 percent dividend instead of the 25 percent it initially projected.

PVGAS is also projecting a dividend equal to 42 percent of the face value, which is double the targeted level set at the 2013 shareholders’ meeting. If the plan is implemented, VND8 trillion out of the VND18.3 trillion it had on hand by the end of 2013 would be reserved to pay dividends.

Businesses also see this as an opportunity to incentivize their management boards and staff. Hoa Phat Group plans to award its board of management with VND41 billion, while Hung Vuong Seafood Company has budgeted VND100 billion for Tet bonuses.

vietnamnet