Dilution pressure on State shareholders after capital increases

Becamex IDC may reduce its ownership in Binh Duong Trading and Development Joint Stock Company (TDC, code TDC) if this unit successfully offers 35 million individual shares, raising its charter capital to VND1,350 billion.

Becamex IDC may reduce its ownership in Binh Duong Trading and Development Joint Stock Company (TDC, code TDC) if this unit successfully offers 35 million individual shares, raising its charter capital to VND1,350 billion.

Becamex IDC may reduce ownership below 51%

After going through the most difficult period in 2022 and losses in 2023, Binh Duong Trading and Development Joint Stock Company (TDC) has gradually shown signs of recovery and overcoming difficulties. At the end of 2024, with a profit of 418.6 billion VND in 2024, TDC officially erased all accumulated losses of 367.2 billion VND at the beginning of the year, increasing the accumulated profit at the end of the year to 50.7 billion VND and still using 519.5 billion VND of short-term capital to finance long-term assets.

Despite having overcome the difficult period, TDC unexpectedly approved a private offering plan at a discount price. In which, the Company plans to offer 35 million shares at VND 11,840/share, raising VND 414.4 billion. The amount raised is to buy back a portion of the bonds coded TDC.BOND.700.2020 (face value of VND 700 billion and due on November 15, 2025).

Notably, the private offering price for 8 investors (5 of whom are TDC leaders) is 10.64% lower than the closing price on February 21, which was VND13,250/share. In particular, if the issuance is successful, the ownership ratio of the State shareholder, the Industrial Development and Investment Corporation - JSC (Becamex IDC, code BCM), will decrease from 60.7% to 44.96% of charter capital, officially losing its controlling right at TDC.

According to Ms. Do Minh Trang, Director of the Analysis Center ofACB Securities Company (ACBS), in terms of accounting principles, when the ownership ratio drops below 51%, the accounting method must be changed from a subsidiary to an associated company. However, there are still exceptional cases, even if the ownership is below 51% of the charter capital, it is still accounted for as a subsidiary, if it is proven that the right to operate and make decisions is still left to Becamex IDC employees at TDC (substance over form).

It can be seen that through the upcoming private issuance, although the State shareholders do not divest, the ownership ratio has been diluted, with the risk of having to change the accounting method from a subsidiary to an associated company.

Many state shareholders lost control after capital increases.

In fact, for the group of enterprises with state-dominated capital, it is not uncommon for the state ownership ratio to be continuously diluted through private issuance.

Specifically, Phuoc An Port Investment and Exploitation Petroleum Joint Stock Company (code PAP) has undergone 5 capital increases from VND 440 billion to VND 2,320 billion from 2016 to August 2024 and is planning to privately offer 60 million shares, increasing its capital to VND 2,920 billion. After these capital increases, the number of shares owned by the Vietnam Oil and Gas Group ( Petrovietnam ) here remains unchanged (35 million shares), but the ownership ratio has decreased from 79.54% to 15.09% and may continue to decrease to 11.99% if Phuoc An Port successfully increases its capital in the near future.

Similarly, Corporation 36 (code G36) was originally under the Ministry of National Defense, but through capital increases, the state ownership ratio was diluted. In particular, after equitization, this enterprise sold 42.21% of charter capital (18.15 million shares) to strategic investors; 10% of charter capital (4.3 million shares) was offered for sale through auction; the remaining 40% belonged to state shareholders (17.2 million shares).

Specifically, in 2016, after the equitization, the charter capital of Corporation 36 increased to 430 billion VND, and by 2017 it had increased to 727.3 billion VND. Of which, the group of shareholders of the Ministry of National Defense did not exercise their right to buy more, so the ownership ratio was diluted and now only owns 18.38% of the charter capital, the State shareholders no longer have the ability to control, Corporation 36 has basically been transferred to the hands of the group of private shareholders.

It can be seen that the continuous private issuance or offering to shareholders without State shareholders participating leads to the dilution of ownership ratio and many State shareholders have lost control of State-owned companies.

Source: https://baodautu.vn/ap-luc-pha-loang-voi-co-dong-nha-nuoc-sau-cac-dot-tang-von-d249625.html