VietNamNet Bridge – The biggest blunder made by Mai Linh, Thai Hoa, TNG or HQC, the giants in their business fields, was that they were burning to make investments to expand business. The overly hot development has made them lose control and fall into the default.

The owner of Mai Linh Group Ho Huy last week admitted that the group now cannot pay debts on schedule.

Mai Linh has borrowed 500 billion dong from 800 creditors, who are the partners in investment affairs, the staff of the company and veterans. The capital has been used as working capital for its transportation services.

Thai Hoa, a big giant in the coffee industry with the total assets of over 1950 billion dong, has also fallen into big difficulties. Its short term debts have exceeded the short term assets by 600 billion dong. Though accepting to sell products at the prices lower than the cost prices, its inventories remain sky high, and the total revenue in the first nine months of 2012 was modest at just 223 billion dong.

Auditors have suddenly raised a question about the operation of TNG Investment and Trade Company, even though it has never incurred loss. The problem is that like Mai Linh, Thai Hoa and many other conglomerates, TNG has used working capital to invest in long term fixed assets.

The Hoang Quan Real Estate Consultancy, Trade and Service has been found as making long term financial investments in associated companies, which has led to incapability for paying short term debts.

The four above said businesses are just some of the Vietnamese big corporations which have fallen down into the “hot growth trap”. All of the four made the same mistake that they used short term capital for long term investments.

They rushed to inject money in the business fields which were thought to be lucrative, including finance and real estate, while they did not anticipate the difficulties of the market.

Meanwhile, due to the overly hot development, their apparatuses have become cumbersome which has made them lose the control over business. The modest income which is not high enough to cover expenses has resulted in the insolvency and the liquidity exhaustion.

Mai Linh Group has offered to sell thousands of cars which it has used for taxi services, in an effort to improve the financial situation.

Mai Linh, which always led the southern taxi market, has fallen into the second position to Vinasun.

In early 2012, VNS caught the special attention from the public with its announced plan to take over other firms and restructure taxi firms in HCM City.

It’s still unclear if VNS would get involved in the Mai Linh’s plan to sell 1000 cars to pay debts. By the end of the third quarter of 2012, VNS’ long term assets had accounted for 88 percent of its total assets.

The THV’s plan to sell assets to restructure debts has moved no step over the last year, while the company is facing the risk of being forced to delist after it has three consecutive years of taking loss.

Six months have elapsed since the day the liquidity problem of TNG was warned by auditors. Though the business performance saw a little improvement in the third quarter, it’s still too early to say the most difficult period is over.

In fact, it is the hot growth period which is over. Meanwhile, economists have warned that it would be very difficult for businesses to escape from the hot growth trap.

Nam Phong