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Friday, May 24, 2013

Listed firms switch to personal sources of capital

Despite lower interest rates, many enterprises are still finding it hard to access bank loans and are turning to personal channels to source capital to main their business.
 
Listed firms switch to have personal capital sources instead of bank loans
A report by Ninh Van Bay Travel Real Estate Joint Stock Company showed that the company borrowed over VND60 billion (USD2.86 million) as short-term loans from the chairman of the company’s Board of Directors Le Xuan Hai and his family during the first quarter of this year.
Even though the interest rates have yet to be made public, the company’s financial expenses during the quarter sharply fell to VND1.2 billion (USD57,292), compared to nearly VND12 billion (USD572,929) of the same period last year.
NVT’s business has improved as it made a pre-tax profit of over VND10 billion (USD477,440) after incurring losses for two consecutive years.
An audited report by Hoang Quan Consulting Trading Service Real Estate Corporation in 2012 showed that the company borrowed approximately VND130 billion (USD6.2 million) from some members of the board of directors by the end of last year.
The company explained that due to funding shortfall, the company borrowed VND77.8 billion (USD3.71 million) from Truong Anh Tuan, the board’s chairman and VND49 billion (USD2.33 million) from Nguyen Thi Dieu Phuong, a member of the board.
The same situation is recorded at several other listed companies such as THV, BAS and TAS.
Many other companies have focused on raising capital from their staff, shareholders and strategic investors instead of depending on bank loans in order to maintain their operations.
This situation is a result of a fact that amid economic difficulties and high rates of bad debts, banks have become more hesitant in lending to enterprises.
While the deposit interest rates have been rapidly cut to 7% per year, the process of lowering lending interest rates seems to be rather slow as the cut depends of the capacity of the banking sector.
Many said that it would take a considerable time to see lending rates to fall from 10%-12% per year.
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