Investment funds in local SMEs - Proposed transaction - EVN Finance Joint Stock Company
Taking into account the provisions for governing bodies that apply under the ‘Freedom of Information Act’ (‘Wet openbaarheid van bestuur’) and the ‘Data Protection Act’ (‘Wet bescherming persoonsgegevens’), the Fund Manager of the DGGF part ‘Financing local SMEs’ will publish its anticipated transactions.
Views
Parties can express their views on the proposed transaction to the Fund Manager by contacting dggf@pwc.com within 30 days after the publication date of the notice. After the transaction has been closed, or after it has become clear that the transaction will not take place, the Fund Manager will respond as soon as possible to these Parties concluding on the expressed views by these Parties.
Description of proposed transaction (English)
Part of DGGF
Financing Local SMEs
Name of Financial Institution (FI)
EVN Finance Joint Stock Company
Domicile FI
Vietnam
Nature of the activities of the FI
EVN Finance (EVNFC) was established in September 2008, as Joint Stock Company regulated by the State Bank of Vietnam (SBV). Formerly owned by the state-owned electricity utility company, Electricity of Vietnam (EVN), EVNFC's initial mission was to arrange and manage capital for EVN. In 2020, EVN fully divested its shareholdings in EVNFC and, since 2022, the company is listed on Ho Chi Minh Stock Exchange (HOSE). At present, no shareholder owns more than 5% of the Company's shares and majority of shares are owned by individuals. EVNFC has become the second largest NBFI in terms of asset size and, under their general finance company license, they can provide a comprehensive range of financial services, including (1) capital mobilization (2) credit activities and (3) other finance and banking activities.
As of Dec-2024, EVNFC total GLP amounts at USD 1.7bn, reaching 274k active borrowers. The company is headquartered in Hanoi and currently has 3 branches, in Hanoi, Ho Chi Minh (in the south of the country) and Da Nang (in the central part of Vietnam). Its portfolio mainly comprises a mix of corporate (62% of GLP) and SME (33%) loans, and to a limited extent consumption loans (5%). Their green portfolio, which mainly include loans for commercial and industrial rooftop solar systems, accounts for 1.7% as of Dec-24.
In the coming years, the company aims at strengthening their positioning in the Vietnamese green lending space, offering both green project financing as well as green loans for SMEs. In addition, the strengthening of their positioning in the SME lending segment represents a good opportunity for EVNFC, which plans to increasingly tap this market segment. In particular, they are looking to specifically increase the outreach to women-led SMEs.
Size of proposed investment
DGGF will provide a senior loan to EVNFC of USD 8 million.
Intended transaction date
The Fund Manager aims to close the agreement with EVNFC Limited on or before May 31, 2025.
Expected financial results
A positive financial return on the investment is expected.
Expected impact
DGGF’s 4-year senior loan will provide essential support to EVNFC to grow its loan portfolio for women led-SMEs. DGGF funding will be fully earmarked to the women SME segments, for loans up to USD 1.5M. In Vietnam, the SME segment is normally not a priority for commercial banks, while it represents a strategic segment where EVNFC wants to focus increasingly in the coming years. Currently, women represent ~36% of EVNFC clients, but the company is planning to increase the ratio further and they are looking to specifically increase the outreach to women-led SMEs. To this end, the company will develop a dedicated women-SME product.
ESG compliance
EVNFC integrates ESG into their risk assessment and risk management fairly well. It has an extensive ESMS, as well as internal and external grievance mechanism, but its ESG policy does not cover all DGGF ESG principles, and multiple exclusion lists are currently applied in the ESG risk assessment and due diligence process. Therefore, EVNFC has agreed to adopt DGGF's exclusion list, revise its ESG policy and adjust its ESMS accordingly. A client protection statement will also be included in EVNFC’s ESG policy, covering DGGF’s Client Protection Principles. EVNFC will share the relevant documents with DGGF to ensure integration of the requirements within six (6) months after signing. As EVNFC’s ESG team has sufficient knowledge of ESG risk assessment and management, no need for additional capacity building is identified.
Tax compliance
EVNFC is a regulated financial institution domiciled in Vietnam and is subject to the statutory tax rates in Vietnam. EVNFC solely provides financing to local SMEs domiciled in Vietnam, which will be normally taxed at the applicable tax rates. EVNFC is not making use of artificial constructions to lower its taxation or the taxation of the SMEs it finances. DGGF’s investment conditions focus on ascertaining this. EVNFC requires the SMEs that it finances to comply with local laws and regulations, amongst others, those regarding tax. DGGF will monitor whether EVNFC will meet its ongoing tax obligations and acts in accordance with the DGGF tax criteria.