Vietnam Rubber Group targets raising US$273 million in Feb IPO

rubberState-owned Vietnam Rubber Group (VRG) will offer 475.1 million shares, equivalent to nearly 25 % of its charter capital, for sale in its initial public offering (IPO) scheduled for February.

With the starting price set at US$0.59 apiece, VRG expects to raise nearly VND6.2 trillion (US$273.1 million) from the share sale.

Under the equitization plan, VRG has a charter capital of VND40 trillion (US$1.76 billion), equivalent to 4 billion shares. Of this, the government will retain a 75 % stake.

The Ministry of Agriculture and Rural Development (MARD) will act as the state’s representative in the sale. Of the remainder, more than 475 million shares, or 11.8 % of charter capital, will be sold through a public auction, while another 11.8 % will be sold exclusively to domestic strategic partners. Some 1.22 %, or nearly 49 million shares, will be sold to current employees and 0.02 % to members of VRG’s trade union.

VRG’s IPO will be similar in size to that of PetroVietnam Power Corporation (PV Power) to be conducted later this month. PV Power will offload more than 468.3 million shares, equivalent to 20 % of its charter capital, at a starting price of VND14,400 (US$0.64) per share. The power firm expects to raise at least VND6.74 trillion (US$296.5 million) from the IPO.

Compared to the Sabeco auction held in December 2017 that saw the state offload a nearly 54 % stake, VRG’s IPO will see a smaller 25 % divestment by the government. It is worth noting that VRG can only sell shares to domestic investors, not foreign investors. Strategic investors are not allowed to transfer shares for a period of five years.

“There are many reasons not to sell VRG’s shares to foreign investors, but the main reason is because of important position of land that this group holds,” Deputy Minister of Vietnam’s Agriculture and Rural Development Ha Cong Tuan was quoted as saying, adding that the 420,000 hectare of land VRG has in Vietnam, Laos, and Cambodia could be a huge advantage and highly profitable in the future. The rubber firm’s net revenue in the first nine months of 2017 stood at VND354.4 billion (US$15.6 million), up 83 % year-on-year. After-tax profit of the group stood at VND708.8 billion (US$31.2 million), up 2.3-fold compared to the same period of 2016.

Earlier, in November 2017, Vietnam’s government approved VRG’s five-year production and business plan for 2016-2020. It targets achieving average annual growth of 18 % during the period, with total revenue surpassing VND40 trillion (US$1.76 billion) and profit of around VND9 trillion (US$409 million) by 2020. As part of its multi-sector investment strategy, VRG also focuses on hydropower, cement, construction and banking sectors.