VNSteel set to carry out IPO despite gloomy stock market

Vietnam Steel Corporation, the country’s biggest steel manufacturer, is set to sell nearly 10 percent stake in an initial public offering next Friday.

Employees manage to unload steel bars from a truck at a construction site in HCMC. Vietnam’s biggest steel manufacturer VNSteel is expected to carry out an initial public offering this week in spite of the bearish market (Photo:Minh Tri)

The government will retain around 90 percent stake in the Hanoi-based company after the share sales and will reduce it to 65 percent at a later stage, which is expected to be carried out at the end of the year.

The steel maker, also known as VNSteel, will sell shares to its strategic partners after the last stage in order to raise its registered capital to VND8 trillion (US$400 million).

Le Phu Hung, general director of VNSteel, said although the market remained soured, the firm still carried out the IPO in accordance with the plan. Hung also added that it was an opportunity for investors to buy shares in VNSteel for attractive prices.

Hanoi-based securities company Vietinbank noticed the stock market with 383 listed firms still continued to grow in spite of its recent losing streak. Analysts said the bearish market will make the IPO more attractive, with share prices of the steel maker being more “practical”.

“The amount that VNSteel will gain through the first share sales is expected to be low as just a small stake will be sold. Thus it will still not be important for the firm’s plan on raising its registered capital via the IPO,” said a financial expert in HCMC.

“The participation of strategic partners, which will help boost VNSteel’s management, development strategy, technology and capital, is what the firm is expecting.”

Japan’s Nippon Steel, US’s Evraz Group, Russia’s Novolipetsk Steel and another Japanese firm Itochu are among foreign steel giants expected to partner up with the Vietnamese manufacturer.

VNSteel's registered capital is VND6.8 trillion ($325.3 million), the government said on its news website (baodientu.chinhphu.vn).

Vietnam produced about 1.33 million tons of steel in the first quarter this year, up 10.2 percent on the same quarter last year, state media quoted the Ministry of Industry and Trade as saying. VNSteel produced 280,000 tons of steel during the period, up 30 percent.

Domestic steel makers last year struggled with a fierce competition from China and ASEAN competitors at home as they did not have any tax exemption since Vietnam joined the World Trade Organization, according to the Vietnam Steel Association.

They also have to fight for market shares with each others as the supply exceeded the domestic consumption, which amounts to around 5 million tons per year only.
 
Three new steel mills were put into operation in the north last year, including Thanh Luc, Hoa Phat and Viet Duc. Their annual output amounts to an average of 1 million tons, raising the country’s total output to 8 million tons per year.

State fuel distributor Petrolimex has said it plans to go public in 2011 by selling a 7 percent stake, and flag carrier Vietnam Airlines wants to speed up its privatization plans this year.

By Chi Chi and Thanh Hang – Translated by Minh Phuong

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