April 12, 2017 11:50 pm JST

Vietjet seeks shareholder approval to lift foreign ownership

Company's ultimate aim is to raise funds overseas to meet rising demand

VietJet Air CEO Nguyen Thi Phuong Thao during an interview in her office in Ho Chi Minh City in January. © Reuters

HO CHI MINH CITY -- Vietnam's low-cost carrier Vietjet Air will seek shareholder approval to raise the upper limit of foreign ownership to 49% from 30% at an annual general meeting on April 20.

Around 26% of the airline is now held by foreign owners, including a 5.4% stake held by Singapore sovereign wealth fund GIC. Vietjet will ask shareholders to vote for the new upper limit before filing the request to the authorities.

Under current regulations, foreign ownership limit in listed companies can be moved up to 49%. However, the rule is not applicable for some sectors such as banking and aviation. For airlines, the foreign ownership limit is 30%.

But unlike other state-owned carriers, Vietjet is a listed company and relatively free from government influence. Vietjet believes that by securing shareholders' approval first, it is more likely to win over the government.

If the state does approve the new foreign ownership limit, Vietjet will be one step closer to listing on an overseas stock market.

To cater to the growing demand of air travel in Vietnam and the region, Vietjet is keen to raise more funds as it speeds up fleet expansion. It also plans to increase 36 international routes by 2019 from the current 23. The carrier also plans to raise its charter capital to over 4.5 trillion dong ($198.4 million) from 3 trillion as of February.

VinaCapital chief investment officer Andy Ho says that listed companies, such as Vietjet, are expected to lift or remove the ceiling on foreign ownership to improve transparency as well as to enhance the company's competitiveness.

However, some experts warn that Vietjet might face resistance from the authorities as the low cost carrier currently depends on domestic passengers who account for more than half of its total passengers. The company has quickly grown to become the second largest carrier in the market, five years after its first commercial flight.

According to the latest reports, Vietjet generated 27.5 trillion dong in revenue, and 2.5 trillion dong in net profit in 2016, year-on-year increases of 38% and 113% respectively. Earnings per share expanded 62% to 9,586 dong.

Vietjet share closed at 134,000 dong apiece on Wednesday.

(Nikkei)

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