Apax operator blames Covid for troubles, vows turnaround

Hundreds of people have been showing up at Egroup’s facilities and the house of its chairman, Nguyen Ngoc Thuy (commonly known as Shark Thuy), to demand a refund of their investment after the company failed to pay them the promised interest after signing “strategic partnership deals” with them.

One of them, Duong Quan, began investing in Egroup subsidiary Egame in 2017 and has together with his family paid over VND3 billion ($127,091) to acquire Egroup shares.

Investors are required to hold their shares for a year, after which Egroup would either buy them back or find a new buyer for them at higher prices.

In 2017 and 2018 Quan’s family earned 20-25% in profits from this deal, which then dropped to 17-18% in 2019 and 2020 and to 14-15% in December last year.

Until 2019 the company always paid the interest in time, but started delaying payments since early 2020, with its staff explaining it away as due to difficulties caused by Covid-19, Quan said.

“Losing the interest from the Egroup investment dragged down our monthly income by 40%.”

But he considers himself “lucky” to not have fallen into debt because of this investment and knows others who have used houses as collateral to borrow from banks for it and are now in trouble.

Behind the curtain

Egroup runs 17 different businesses in various industries, which include beverage chain Soya Garden and Takson Beauty chain.

Apax Holdings, a subsidiary which runs Apax Leaders, is the only listed company in the group.

It had loans of over VND1.98 trillion at the end of the third quarter, a debt to equity ratio of 1.2. Apax Holdings had to pay nearly VND500 billion in financial costs in the first nine months.

Egroup has six bond issuances worth over VND1.34 trillion that have yet to mature with a coupon rate of 12-12.5%, a majority guaranteed by Apax Leaders shares.

Shark Thuy, who became well-known after participating in the TV reality investment show Shark Tank Vietnam in 2018 and 2019, said the pandemic forced his education facilities to close in 2020 and 2021 and caused major disruptions to Egroup’s cash flows.

“This is the main reason for our difficulties in doing business, operating and paying salaries and interest,” he told VnExpress.

In the last two years they had to transition from teaching face-to-face to online, which cost millions of dollars while still having to pay rents and other costs at their brick-and-mortar facilities, he said.

Apax Leaders has nearly 130 centers in 30 localities.

Their expenses rose to nearly VND1 trillion during Covid-19.

“We anticipated the risks, but the pandemic lasted longer than we expected and so our plans were destroyed and a crisis came.”

The transition from offline to online made Egroup struggle to pay its staff salaries, and many quit, including foreign teachers.

Egroup subsidiaries owe Hanoi social insurance nearly VND26 billion in premiums for over 1,000 workers.

Thuy, who has been leading Egroup for 14 years, said the company management is also responsible for the crisis.

“We launched a quick growth strategy in 2019. If Covid-19 did not come, that strategy would have been very successful from 2020 onwards.”

Thuy rejected investors’ charges that the company raised money to invest in stocks, cryptocurrencies and property, saying the company only invested in property to expand its education business.

Recovery plan

He said he would lead the business to recovery but needs around three years for it. He has asked investors to accept lower interest payments to help speed up the process.

“That is an estimation based on our limited resources. If a major investment fund is willing to partner with us, things will be different.”

The company is now focusing on improving its teaching quality, stabilizing its payroll and negotiating with landlords for lower rents.

Thuy promised to pay all employees their salaries and even reward them with shares to compensate for the difficulties.

“I would like to make an apology to all current and former employees.”

He said a group of investors has yet to believe in his three-year recovery plan but he would continue discussion with them.

“The only thing I want is trust from authorities, investors, customers, and the public. We hope to have another chance and more time.”