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Vietnam Rubber Group IPO raises US$57.7 million, falling short of Hanoi’s target

2/2/2018 – Vietnam’s leading rubber plantation and processing company Vietnam Rubber Group (VRG) has raised VND1.31 trillion (about US$57.7 million) at the Ho Chi Minh Stock Exchange board.

The proceeds were far lower when compared to the state’s expectations of at least VND6.2 trillion (about US$273.1 million) for the IPO.

A total of 11.8 percent stake was placed on sale through the auction, with an additional 11.8 percent of VRG for domestic strategic partners. Of 475.1 million shares in the auction, only 110.7 million shares representing 21 percent were sold at 13,000 dongs a piece.

In size, VRG’s IPO was similar to PetroVietnam Power Corporation (PV Power) which was conducted in January. However, the final results were different with the 20 percent stake offering of PV Power in IPO raising more than six times at VND6.996 trillion (about US$308 million).

According to experts, restricting foreign strategic investors is one of the main reason that made VRG’s IPO less attractive compared to PV Oil IPO. Its IPO reflected strong investor interest and has exceeded government’s expectations in terms of proceedings.

VRG is the leader in domestic natural rubber production, accounting for one-third of the country’s natural rubber production area, and its sales represented 32 percent of total rubber sales volume in Vietnam last year.

The company said on Friday following the auction that it will ask the government to change some of the conditions for investors, including raising the foreign ownership limit and allowing foreign investors to bid for a strategic stake later.

Hanoi’s recent IPO aims to raise funds in an effort to fund big-ticket infrastructure investments. In the 2018 budget, state revenue is projected at US$58 billion, with an expenditure of US$67 billion. The expected deficit of US$9 billion will have to be covered by borrowing, while payments on principal total US$7 billion this year.

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