How real estate businesses meet their capital demands?

Real estate companies are constantly seeking ways to gather capital to finance their operations and new ventures. In this article, we will explore how prominent real estate firms in Vietnam are fulfilling their capital needs.

Vinhomes: Non-convertible Bonds

One such company is Vinhomes (stock code: VHM), which plans to raise a total of VND 10,000 billion through multiple corporate bond issuances. These bonds will not be convertible, carry no warrants, and have no collateral. The latest issuance is expected to take place in the third quarter of this year.

Vinhomes has not disclosed specific information about the interest rates, issuance structure, or purpose of the upcoming bond offerings. As of December 31, 2023, the company had outstanding bonds worth VND 15,365 billion, a 57% increase compared to the end of 2022.

Phat Dat Corporation: Share Issuance

Phat Dat Corporation (stock code: PDR) recently completed its bond repayment, and it is now planning to issue a maximum of 134 million shares with a subscription ratio of 1:5.5. This means that existing shareholders will be able to purchase 5.5 new shares for every 1 share they hold. The offering price is set at VND 10,000 per share, significantly lower than the current market price of VND 31,450 per share. The expected proceeds of around VND 1,343 billion will be used to fund various projects, including eco-urban areas and residential complexes.

Novaland Group: Equity and Share Issuance

Novaland Group (stock code: NVL) plans to sell a maximum of 200 million shares to professional securities investors at a price of VND 10,000 per share. Additionally, the company will issue up to 1.17 billion new shares at a price not lower than VND 10,000 per share, with a issuance rate of 60%. Novaland also plans to issue Employee Stock Ownership Plan (ESOP) shares in 2022 and 2023, with a maximum issuance of 1.5% of the company’s outstanding shares.

The proceeds from the share issuances will be used to increase capital in subsidiary companies, restructure debt, and pay salaries to employees. If successful, Novaland expects to raise approximately USD 500 million.

Dat Xanh Group: Existing Shareholders

Dat Xanh Group (stock code: DXG) recently completed the sale of over 101 million shares to existing shareholders at a price of VND 12,000 per share. This raised over VND 1,220 billion, increasing the company’s charter capital from over VND 6,207 billion to over VND 7,224 billion.

The capital raised will be used to supplement the capital of subsidiary companies, repay bonds, pay taxes, and cover operating expenses.

High Demand for Real Estate Bonds

According to the Vietnam Association of Realtors, the total value of real estate bonds maturing in 2024 is estimated to be VND 121,100 billion, the highest in the past five years. However, a report by VIS Rating indicates that the value of high-risk bonds with slow principal and interest payments in 2024 is only VND 40,000 billion, accounting for 19% of the total bonds due in that year.

Real estate companies consider the bond market an effective long-term capital mobilization channel alongside traditional bank loans. However, it is crucial to regulate these activities to ensure healthy development and mutual benefits for all parties involved.

Mr. Bui Quang Anh Vu, CEO of Phat Dat Corporation, emphasized the importance of adopting long-term financial strategies and prudent financial management. He believes that aligning real estate projects with customer demand and implementing reinvestment plans are essential factors for sustainable growth in the industry.

For more finance and economics articles, visit Business Today.