Song Da Corporation owes more than 10,000 billion VND

The Corporation's debt-to-equity ratio is 3.8 times, forcing the management agency to consider a plan to increase charter capital to reduce this ratio to below 3, before selling part of the State capital.

According to information from the Government Office,The Ministry of Construction has just submitted to the Prime Minister for approval the equitization plan for Song Da Corporation. Therefore, this agency has just sent a document requesting the Ministry of Finance, the Ministry of Planning and Investment, and the State Audit to give their opinions on the plan proposed by the Ministry of Construction.

Specifically,The Ministry of Construction proposed to equitize the corporation by selling part of the State capital and simultaneously issuing to increase charter capital.According to the financial report by the end of 2015, the company's equity was 2,645 billion VND but its debt was up to 10,190 billion VND. Thus, the debt to equity ratio of this corporation is 3.8 times.

In order to reduce this ratio to below 3 times - the level considered correct according to regulations, the Ministry of Construction proposed to increase the charter capital to 4,500 billion VND (currently 4,438 billion VND). This agency also said that if the capital is increased too high, it will not be able to ensure the payment of 3% dividends in the years after equitization.

Currently, Song Da Corporation accounts for about 85% of the domestic market share in hydropower construction, and will soon expand to Laos and Cambodia. Therefore,The Ministry of Construction proposed that for equitization, the corporation would issue 450 million shares, starting at VND10,000. Of which, the State would hold 51%, which would decrease to 36% by 2020. Besides 0.18% being sold at preferential prices to employees, the remaining would be sold to strategic investors and auctioned publicly.

In addition to some criteria on the field of operation, the Ministry of Construction also believes that,Strategic investors must be entities with total assets of at least VND 1,000 billion in 2015. Owner's equity is VND 300 billion, profit after tax is positive, no bad debt, and sufficient contributed capital is greater than the number of shares purchased.

After equitization, the Ministry of Construction said the corporation's revenue plan is VND2,890 billion and pre-tax profit is VND160 billion in 2016. However, after equitization, by 2020, Song Da has set a rather modest target of VND4,000 billion in revenue and VND216 billion in pre-tax profit. Accordingly, the ROA index (return on total assets) is only approximately 1%, with a dividend target of 3%.

In a review meeting held in June, leaders of the Ministry of Construction assessed that some affiliated enterprises, including Song Da Corporation, were not operating effectively.

According to VNE