FDI companies under-represented on exchanges

Friday, Sep 09, 2022 08:46

A branch of Imexpharm in Binh Duong Province. SK Investment Vina III has undertaken buyouts to secure 53.94 per cent ownership of the comapny. — Photo kinhtechungkhoan.vn

More and more foreign-owned companies have been listed on stock exchanges over the past five years, but that's not the case for foreign-founded ones.

Twenty years ago, the Government issued Decree 38, allowing adequate foreign direct investment (FDI) companies to transform from limited entities to joint stock entities and go public.

The decree saw an exodus of foreign-founded companies to stock exchanges between 2003 and 2008. However, the exodus quickly abated afterward and the most recent newcomer was Siam Brothers Vietnam, which engaged in public offerings in 2017.

Among those listed companies, just 11 remained on the exchanges by June 30, equivalent to a total market cap of over VND147 trillion. Everpia and Mirae were bright spots, faring relatively well after their initial public offerings (IPO).

The others had to experience either founders' withdrawals or share delisting. For instance, Thanh Thanh Cong - Bien Hoa JSC saw its foreign founder Bourbon Corporation transfer its ownership to Vietnamese partners just two years after being listed on HOSE. Full Power had its shares delisted on grounds of three consecutive years of unprofitability, four years after IPO.

Some FDI companies have talked about going public recently, but no action has been done so far to end the five-year period of foreign absence. Notably, a Japanese retail giant announced its plan to issue shares on Vietnamese exchanges in November 2021. Charoen Pokphand Foods, the parent company of C.P Vietnam, gave the latter the go-ahead to register for listing on HOSE in April.

While no new foreign-founded companies floated their shares on stock markets in the past five years, some foreign investors found a new way to go public – they undertook buyouts to transform domestically-owned listed companies into foreign-owned ones.

The buyout cases are numerous. In July, SK Investment Vina III, the largest shareholder of Imexpharm, acquired Red Capital, another shareholder, to raise its ownership in Imexpharm to 53.94 per cent.

SK Investment Vina III is continuing to buy into the pharmaceutical firm with the aim of achieving 55 per cent ownership. The offer to purchase shares at VND66,000 apiece was approved by Imexpharm's board in mid-August.

Ngoc Nghia Industry - Service - Trading JSC changed hands in the same year as Indorama Netherlands B.V bought out 97.8 per cent of its shares in April and implemented board reorganisation in May.

TCG Solutions Pte LTD, a company affiliated with SCG Group, took over Bien Hoa Packaging JSC in 2020. SCG Group also secured 54.39 per cent ownership of Binh Minh Plastic JSC in late 2019.

According to the Central Economic Committee, FDI companies take up 20.13 per cent of GDP, 72 per cent of total exports and 50 per cent of total industrial output. Yet they account for roughly 2 per cent market-cap of the three exchanges - HOSE, HNX and UPCOM. — VNS

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