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GIC suffers 60% loss as it invests in Vietnamese taxi company during a time when ride-hailing apps are on the rise

According to an article in the Tiền Phong newspaper, Singapore’s Government Investment Corporation (GIC) had realised a 60% loss over 4 years after it sold 5.4 million shares in Vietnamese taxi operator Vinasun.

The taxi operator was operating a fleet of 5,000 taxis and was mainly concentrated in Ho Chi Minh City, where 4 in 5 of its taxis were stationed. In August 2014, GIC became one of the first foreign funds to have invested in the firm when it bought a 7.96% stake.

The Singapore fund bought shares at VND45,000 (S$2.64) per piece for a total consideration of VND202 billion (S$11.85 million). In a disclosure to Ho Chi Minh City Stock Exchange last month, GIC said it sold all of its shares on 25 May for VND13,900 (S$0.82) a piece.

While GIC had obtained VND75 billion (S$4.4 million) in proceeds, it had also lost S$7.45 million when compared to its purchase price.

Even as Temasek invests in ride-hailing app, GIC proceeds to invest in an “old inefficient way” of doing things

Back in April 2014, Temasek Holdings had invested an “over-eight-figure sum in US dollars“ in ride-booking app GRABTaxi through its subsidiary Vertex Venture Holdings.

Vertex CEO Chua Kee Lock was quoted as saying: “We invest in potential champions that have developed new technology platforms or business models that disrupt the incumbents and old inefficient ways of doing things.”

Despite a senior Temasek staff calling taxi companies “old inefficient way” of doing things – in a clear reference to taxi companies – GIC had made a large investment in one such company despite potential warning signs.

For example, GRABTaxi had entered the Vietnamese market in Feb 2014, some 6 months before GIC had invested in VinaSun. One senior personnel from GrabTaxi was quoted as saying that it was willing to take a financial hit “while building out a solution that helps transportation”.

Shortly after, rival ride-hailing app Uber entered the Vietnamese market, where it had experienced tremendous growth in the next 6 months. The ride-hailing app then thanked the Vietnamese for their “overwhelming support from riders and partners” alike.

An investment analyst gave an obvious conclusion that the rise of “Uber and Grab has since put pressure on traditional Vietnamese taxi companies, including Vinasun”. The latter saw its after-tax profit drop to VND191 billion ($11.2 million) in 2017, or 40% less than 2014.

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