Despite mounting losses at Zion, VNG remains adamant about maintaining its ownership at the e-payment firm to remain in this promising market.
|VNG has recently dropped its ownership in Zion but is resolved to keep that ratio |
VNG is no longer the largest shareholder of Tiki after the e-commerce platform raised charter capital. According to the latest financial report of local unicorn VNG, its ownership rate at Tiki fell to 22.23 percent from 24.6 per cent last year. The move took place as the e-commerce site in late May increased its charter capital to VND208.31 billion ($9 million) from VND190.9 billion ($8.3 million).
After splashing out $17 million to gain 38 per cent of Tiki’s stakes in 2016, VNG has been constantly reducing its ownership at the company as the alliance proved one of its inefficient deals as the e-commerce platform has yet to turn any profit to date. In 2019, its after-tax losses reached VND1.765 trillion ($76.74 million).
In this second quarter, VNG reported a deficit of nearly VND16 billion ($695,650), which is something of an improvement against the same period last year when it lost VND102.3 billion ($4.45 million).
On the other hand, throughout the first half, it earned VND80.4 billion ($3.5 million) while last year it was VND70.06 billion ($3 million) in the red.
During the observed period, the most drastic change at the company was the VND182 billion ($7.9 million) rise in long-term financial investments to VND1.303 trillion ($56.65 million). The lion's share of this sum was poured into Zion JSC, the operator of ZaloPay, which was the only firm getting added capital from VNG, while the rest was poured into VNG's main segment, gaming.
On June 30, VNG’s ownership in Zion remained unchanged since last year at 60 per cent, but its investment doubled to VND714.79 billion ($31 million). However, on the flip side, VNG also raised its provision for the firm to VND371.4 billion ($16.15 million), up 75.8 per cent year to date.
This reflects the gloomy performance of Zion in recent years. In 2018, Zion reported a deficit of VND133.4 billion ($5.8 million), as much as seven times its loss in 2017.
Flagging e-payment as a promising sector, VNG acquired Zion in 2016. However, similar to e-commerce, companies running e-payment business have been constantly reporting losses. As a result, early last year VNG had to narrow its ownership rate at the firm from 100 to 60 per cent.