The group’s debt-to-equity ratio, for example, rose from 4.2 at the end of March to 5 by the end of June — an increase of about 20 percent. Moreover, that ratio was only 3.8 in the third quarter of 2024, indicating a clear upward trend.Moreover, widening the lens, from 2021 to 2024, revenue grew at a compounded annual growth rate (CAGR) of 14.58 percent, whereas liabilities grew more than twice as fast, at 36.44 percent.
This does not look sustainable.
There are, however, some efforts being made to address this.
Vingroup has floated plans for several big infrastructure projects like a US$60 billion high-speed railway between Ho Chi Minh City and Hanoi, a new US$14 billion port in Hai Phong, and a US$4 billion metro line connecting Ho Chi Minh City to Can Gio, which would bring in significant state capital contributions.
Funding for these long-term projects, however, is generally tied to milestones or project deadlines and targets, with the substantial profits they offer taking years to realise.
Vingroup, however, needs cash now — short-term assets at the end of Q2 were sitting just 4 percent above short-term liabilities, a buffer to be sure, but not a very big one.
Of course, the alternative to securing new income streams is to keep on going like it is, rolling over its debt into a bigger and bigger ball.
This, however, means greater risk and subsequently higher financing costs too. A reality that is already showing.
In August 2024, for example, Vingroup subsidiary Vinpearl refinanced a US$284 million bond on the Singapore Stock Exchange that paid 3.25 percent, replacing it with a US$150 million bond at 9.5 percent — a significant jump in borrowing costs.
This wasn’t an anomaly either, but rather part of a broader trend.
Indeed, for the first six months of 2025, Vingroup paid out VND 19.1 trillion (US$728.4 million) in finance expenses, up from VND 15.9 trillion (US$604.9 million) in the same period of 2024, an increase of VND 3.2 trillion (US$123.5 million) or about 20.4 percent.
In short, Vingroup looks to be on the cusp of, if not already in, a debt spiral.
On that note, Vingroup is big. Its assets are the equivalent of about 7 percent of Vietnam’s GDP. Its debt is also largely held by local banks that are already stretched thin; that’s not to mention it has thousands of employees and suppliers — if it can’t break the cycle, there will be significant repercussions that will reverberate through Vietnam’s economy.
But that’s not to say its demise is imminent.
History is littered with big companies that built empires on huge levels of debt, that have eventually fallen over, only to come out the other side smaller but still kicking.
South Korea’s Daewoo, one of its star chaebol, went bankrupt in 1998 in the aftermath of the Asian Financial Crisis. It was broken up with parts sold off, but still exists with business in the automotive sector and construction.
General Motors declared bankruptcy in 2009, with the Obama administration stepping in and taking a majority stake and leading the restructuring of the company, successful to the extent that it is still around making cars today.
And Italy’s Parmalat went bankrupt in 2003 with debts totalling €14.3 billion, but is still making cheese and yogurt just now as a subsidiary of France’s Lactalis.
The point here is that though Vingroup’s consolidated financial statements for the second quarter of this year highlight a company incurring debt at pace and leveraged to a point that it will be difficult to come back from, that it isn’t necessarily the end of the line.
All of that said, some sort of concerted effort to arrest its continued accumulation of debt and/or to boost its revenue would be better executed sooner rather than later.
