SCIC unveils plan to sell State capital in ten firms

SCIC unveils plan to sell State capital in ten firms

The State Capital Investment Corporation has unveiled plans to sell the entire State capital of 10 big State-owned enterprises which could garner the State budget earnings of almost US$4 billion.

These target companies include companies on the stock exchange such as dairy giant Vinamilk (VNM), software producer FPT Corp (FPT), Bao Minh Insurance Corp (BMI), Tien Phong Plastic Co (NTP) and Binh Minh Plastic Co (BMP).

This is part of the restructuring scheme for the State Capital Investment Corp (SCIC) which was endorsed by Deputy Prime Minister Vu Van Ninh on October 8.

The timetable for the divestment has not yet been decided.

SCIC, which was established in 2006, is currently managing State capital in over 500 enterprises which businesses range from financial services, energy, manufacturing, IT, telecommunications to transportation, consumer products and healthcare.

Based on market value, Vinamilk is considered the most valuable investment. SCIC holds 45.1 per cent of Vinamilk's stakes, worth almost $2.5 billion. The company is the biggest listed company in Viet Nam with a market value of VND127.2 trillion ($5.7 billion) as of October 14.

Vinamilk's chairwoman Le Thi Bang Tam declined to comment on the SCICI's plan and said the company would comply with the Government's decision.

Eight of the 10 companies which are subject to SCIC's divestment list shares on the two national stock exchanges. The divestment is expected to bring in a total of $4 billion to the State budget.

"This is a significant financial source to offset the State budget deficit which is rather large this year and will prompt the snail-paced progress of State-owned enterprises equitisation," said Bui Nguyen Khoa, an analyst of BIDV Securities Co.

According to the Ministry of Finance, Viet Nam's State budget deficit is estimated to hit VND106.8 trillion ($4.8 billion) in the first seven months of this year, only 44.5 per cent of the original forecast.

Viet Nam's trade deficit was 5.3 per cent of GDP, $186.2 billion, in 2014 and is expected to about 5 per cent of GDP by the end of this year.

The earnings will also help the Government repay public debt which amounted to $92.6 billion, equivalent to 46 per cent of GDP by October 11, a rise of 9.6 per cent year-on-year, according to the Economist's data.

This figure was however lower than the previous estimate of 59.6 per cent of GDP provided by the Vietnamese Ministry of Finance.

According to Khoa, SCIC's divestment plan is in line with the Government's policy of reducing State holdings in industries which do not need State supervision.

"These are investments that the State does not need to hold as they are not relevant to national security," Khoa said.

Also according to the plan, SCIC is allowed to retain State capital in other nine large State-owned enterprises, including insurer Bao Viet Holdings (BVH), chemical producer Traphaco Co (TRA), Hau Giang Pharmaceutical Co (DHG) and Domesco Medical Import Export Co (DMC).

Regarding the potential of foreign investment, Khoa said foreign holdings in attractive companies like Vinamilk and FPT have already hit the ceiling limit which is capped at 49 per cent under current laws.

"If the caps on foreign ownership in these companies are not lifted, SCIC can only sell to domestic investors and this could add heavy pressure in the market with a big sum of shares flooding the market," Khoa said. — VNS

No Company State holding

1 Viet Nam Dairy Products Joint Stock Company (VNM) 45.1%

2 Bao Minh Insurance Corporation (BMI) 50.7%

3 Viet Nam National Reinsurance Corporation (VNR) 40.4%

4 Tien Phong Plastic Joint Stock Company (NTP) 37.1%

5 Binh Minh Plastic Joint Stock Company (BMP) 38.4%

6 Vietnam Property and Infrastructure Joint Stock Company 47.6%

7 Ha Giang Mineral Mechinics Joint Stock Company (HGM) 46.6%

8 Sa Giang Import Export Corporation (SGC) 49.9%

9 FPT Corporation (FPT) 6%

10 FPT Telecom Joint Stock Company 50.2%

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