Dragon Capital’s strength may have diminished somewhat but its continued existence as the oldest Vietnam-based investment firm is beyond dispute.
Just like a person must experience real challenges when stepping into adulthood, Dragon Capital is finding out what it’s like to come of age. The 1994-established investment firm - Vietnam’s oldest - has just celebrated its 15th anniversary with a not-so-happy event: Mr John Shrimpton parted ways with the company. While resignations are, of course, perfectly normal at any enterprise, Mr Shrimpton’s departure, as one of the two key founding partners, created a degree of disorder at the UK-registered investment firm and in Vietnam’s stock market. Especially troubling is his leaving at a time when the firm enters a period of restructuring and deals with the delayed Tiberon mining project.
Vietnam’s equity market responded negatively in late December and early January to Mr Shrimpton’s resignation, with rumours circulating that Dragon Capital could shortly liquidate its funds in Vietnam. According to Thang Long Securities Company (TLS), the stock market on January 12 traded sideways at around 512 points in the first half of the day then in the second half fell heavily, by 16.75 points (3.25 per cent) to a day low. “The negative impact on the market in the second half could have resulted from these rumours, or alternatively concerns about a rise in prime rates,” said Mr Quach Manh Hao, Deputy General Director of TLS. “The executive changes at Dragon Capital were wrongly rumoured as a capital withdrawal. The investor confidence index turned negative, and hence has been fluctuating recently. Market sentiment continues to be worse after three days of falling.”
Fortunately, rumours are just that and Mr Dominic Scriven, the other founding member and newly-elected CEO of Dragon Capital, immediately confirmed with VET that the firm was still here and that talk of liquidation is completely groundless. “I firmly say that these are rumours only and Dragon Capital has never thought of liquidation in Vietnam,” said Mr Scriven, one of few foreign entrepreneurs in the country who speaks Vietnamese fluently. “It is possible that when Dragon Capital announced the resignation of Mr Shrimpton people were concerned about our firm’s long-term commitment to Vietnam.”
Veteran’s exit
Dragon Capital has undoubtedly developed into a diversified investment group with an expansive focus on Vietnam’s capital markets since its inception in 1994, with an initial base of $16 million and eight staff, when Vietnam’s GDP per capita was just $227 and the stock market was still six years away. Coming into life at the time of the Mexican Tequila crisis and being the only Vietnam-dedicated fund manager to survive the Asian crisis, Dragon Capital is no stranger to adversity and challenge and has been a partnership led by six executive directors, including Mr Scriven and Mr Shrimpton, all of whom have been together for nearly the entire 15-plus years of its history.
Amid the comings and goings of senior executives and investment officers seen widely at other investment firms in Vietnam, Dragon Capital has been viewed as a steady place for employment and has developed strongly, with total assets under management as at late 2009 of $1.5 billion and a staff count exceeding 100 across a variety of closed-end funds and principal investments as the largest foreign investment company in Vietnam. It is also the only one to be entrusted with a domestic asset-management licence and is well regarded for its work in corporate governance and its extensive ties at all levels of government. While Mr Scriven has been imaged well in the public thanks to his fluent Vietnamese and extensive external networking, Mr Shrimpton was known as the man behind the scenes.
Dragon Capital’s foreign and Vietnamese professionals cover all significant markets and sectors, from public and private equity to fixed income, resources, property, clean development, and infrastructure, and have all required skill sets, from client service to economics, investment modelling, origination, legal, mid-office, valuation and governance. The firm is 85 per cent-owned by management and staff, with the balance held by the World Bank’s International Finance Corporation (IFC) and the French Government’s development finance entity, Proparco.
In 2009, in the wake of the global financial crisis and Vietnam’s stock market crash, at the behest of its board of directors the firm began to review its strategy and management while its 15th anniversary last year also prompted some navel-gazing. According to Mr Scriven, the firm’s board of directors (BoD) intended to institutionalise its organisation after 15 years to suit the new period, as a positive transformation into an advanced model. “I was asked by the BoD to take the role of CEO and the re-organisation of Dragon Capital’s management has been the result of a process that started more than a year ago,” said Mr Scriven. “And this will continue.” Clearly, the management restructuring was not favoured by Mr Shrimpton. “He felt this change limited his role so he decided to resign and the BoD agreed,” Mr Scriven said.
After Mr Scriven took on the CEO role in mid-December last year, other corporate roles for operations and risk management are likely to follow since Mr Shrimpton did not want to participate in the new management structure. He could not be contacted at the time of writing as, according to foreign media, he is in New Zealand, where he owns property, and has not revealed any future plans to his former colleagues.
Business as usual
While Mr Shrimpton’s departure came as a surprise to those familiar with Dragon Capital, the firm also ended 2009 on a another not-so-happy note, with the Vietnamese Government threatening to revoke the licence of an affiliate company, Tiberon Minerals, acquired by Dragon Capital in 2006 to develop a mine at Nui Phao in northern Thai Nguyen province, with tungsten and fluorspar deposits. The $147-million mining project, known as the Nuiphaovica venture, received a warning about possible license revocation by provincial authorities last year due to its slow progress, even though investors have spent almost $122 million on land clearance, resident relocation and other works since obtaining a licence in 2004.
Nui Phao was expected to yield 4,788 metric tons of tungsten, 222,458 tons of fluorspar and 2,038 tons of bismuth a year, according to Toronto-based Tiberon, which was bought by Dragon Capital through its fund in 2007. In October last year it asked the local government to delay starting production until 2010 because of the global financial crisis. Tiberon has a 70 per cent stake in the mine and some outsiders familiar with Dragon Capital believed that Mr Shrimpton was in fact ousted over the Tiberon deal, which he reportedly led.
Although to date there has been no official announcement about Nuiphaovica’s licence revocation, the project was meant to have gone live already but has suffered delays, including an inability to get sufficient financing.
Regardless, Dragon Capital’s BoD determined that the firm needs to move on after 15 years of success in Vietnam and has stated that its ongoing re-organisation program has no link to the delayed Nuiphaovica venture. According to Mr Scriven, Dragon Capital now has seats at the board of management at almost 25 local investee companies through six funds, compared with three funds in its first ten year period, among them well brands such as Asia Commercial Bank (ACB), Sacombank, and VP Bank. It has also teamed up with Sacombank to manage VietFund Management (VFM), with Ho Chi Minh City’s Infrastructure Fund for Urbanisation (HIFU) to run the Ho Chi Minh City Securities Corporation (HSC), and another local partner to conduct the Hanoi Lakeview venture in real estate.
Looking five years ahead, Mr Scriven said that its focus for now is on senior human resources re-organisation as a prime foundation to “acquire new opportunities”. In terms of investment, he reaffirmed that Dragon Capital’s strategy is long-term, investing into solidly-performing Vietnamese companies. “We will speed up our fund raising plans in Vietnam,” he said. If things go well, Dragon Capital will launch its Clean Development Fund by the end of this quarter, with a total value of $50 million, investing into waste processing and recycled energy. In the absence of his long-time companion, Mr Scriven may well succeed yet again.