It seems Thai giant Central Group may have made a big mistake in buying 49 per cent of domestic electronic retailer Nguyen Kim. The company has shown many negative business signs, including potentially being prohibited from doing business due to tax evasion.
Facing a block on business operations
Ho Chi Minh City Tax Department blockaded Nguyen Kim’s bank accounts several days ago. Photo: zing.vn
On July 13, Ho Chi Minh City Tax Department issued a decision to blockade Nguyen Kim’s 26 bank accounts held across 18 banks in order to collect 10 years of evaded taxes.
Before July 13 Nguyen Kim had paid only VND3 billion ($132,158) out of a total of VND148 billion ($6.5 million) in taxes owed to the tax department via its bank accounts.
The department was forced to use coercive methods to withdraw the remainder of the tax owed. If Nguyen Kim continues with this tax evasion, the department may temporarily prohibit its business operations.
Central Group’s representative told VIR that they have no official information related to the blockade of Nguyen Kim’s bank accounts due to its tax evasions or to how this impacts on Central Group.
On June 29 deputy director of the Ho Chi Minh City Tax Department Nguyen Nam Binh signed Decision No.3506/QD-CT to issue an administrative sanction on Nguyen Kim Trading JSC due to corporate income tax evasion.
The department acted immediately, collecting arrears of VND104 billion ($4.58 million), a fine of VND19 billion ($837,000), as well as the remaining payment of VND24 billion ($1.05 million).
A failed investment for Central Group
Investing in Nguyen Kim proved a poor investment decision by Central Group?
As two domestic giants Mobile World and FPT are experiencing increasing growth, since 2013 Nguyen Kim has revealed its business is struggling to keep up with these competitors. Even merging with Thai giant Central Group in 2015 did little to boost its sluggish revenue.
In 2013 Nguyen Kim’s revenue reached VND8.4 trillion ($370 million), lower than Mobile World’s at VND9.5 trillion ($418.5 million).
In 2014-2016, the time of merging with Central Group, Nguyen Kim’s revenue still remained at an average of just VND9.3 trillion ($411.1 million) per year, while Mobile World’s revenue skyrocketed from VND15.8 trillion ($696 million) in 2014 to VND44.6 trillion ($1.96 billion).
Furthermore, in 2016, FPT Shop overtook Nguyen Kim with VND11 trillion ($484.6 million).
Since the trade deal between Nguyen Kim and Central Group took place, its scale of expansion has been inferior to its two opponents. Currently the total number of Nguyen Kim stores is 55, much lower than Mobile World’s 1,065 stores, Dien May Xanh’s 642 stores and FPT shop’s 473 stores, according to their websites.
Nguyen Kim has experienced significant setbacks since merging with Central Group. According to Buzzmetrics’ survey carried out between August 2016 and May 2017, Nguyen Kim’s market share fell from 20 per cent to 8 per cent, while Dien May Xanh recorded a huge increase, from 38.7 per cent to 73.8 per cent.
The long-fall in revenue and in market share as well as the Ho Chi Minh City Tax Department’s decision to collect its evaded taxes suggests that buying Nguyen Kim may have been an unwise investment decision by Thailand’s richest family Central Group.