Hoa Binh Corporation

  • Region: Asia
  • Location(s): Ho Chi Minh City, Vietnam
  • Investment Vehicle: SEAF Blue Waters Growth Fund
  • Industry: Agricultural and Power Machinery Assembly and Distribution
  • Date of Initial Investment: Jun 2009
  • Type of Investment: Mezzanine

Established in 1989, Hoa Binh Corporation (HBC) produces, assembles, and distributes a variety of power generators, agricultural machinery, and other equipment essential to powering the country’s population and modernizing Vietnam’s farms.

The Need

In the energy sector, Vietnam suffers from an undeveloped and unreliable power grid, which forces families and businesses to rely heavily on personal generators as a dependable energy source. Consequently, there is significant need for more reliable power sources. Secondly, although 60% of the Vietnamese population works in agriculture, agriculture only represents approximately 20% of the country’s economic output. This mismatch of effort and output is due largely to the fact that only 20% of domestic agriculture is mechanized. A sizable portion of rice (the country’s primary agricultural product and 5% of the national exports) is lost during the initial harvesting process due to the inefficiency of manual harvesting. This loss has a direct impact on the 10 to 15 million families that cultivate the 75 million small rice fields in the country. HBC provides these Vietnamese farmers with Japanese-made Kubota rice harvesters that are more affordable than other top-of-the-line models and yet more reliable than the lesser known models available on the market.

In 2009, HBC needed financing to invest in land and equipment for a power product assembling facility and to finance its retail outlet in Dong Nai and its office and warehouse in Ha Noi. Additionally, the company needed working capital in order to increase the company’s efficiency and improve the company’s products and services

The Investment

SEAF’s Blue Waters Growth Fund (BWGF) made a convertible bond investment in July 2009. Keirn O’Connor, managing director of SEAF BWGF at the time, joined the board of HBC and said, “Apart from providing capital to foster our growth, this partnership with SEAF is an inflection point in the improvement of management and stable development of HBC.” O’Connor stated further, “Through this partnership, we have a unique opportunity to bolster development in Vietnam in at least three distinct ways. First, HBC will create new manufacturing, supply-chain and retail jobs—some in needy areas like the Mekong Delta. Second, strengthening HBC will help improve access to electricity for all Vietnamese consumers, especially those not fully connected to the power grid. Third, HBC supplies products that increase the productivity and improve the mechanization of the agricultural sector, which will have a positive impact on many Vietnamese farmers.”

The Impact

With SEAF’s business assistance and infusion of working capital, HBC was able to increase its efficiency and output, scale up its subsidiary production facility and increase its workforce from 119 employees in 2009 to 358 in 2012.

HBC’s impact on farmers has been equally impressive. HBC’s rice harvesters have enabled farmers to cut costs by approximately 30% and reduce harvest losses by approximately 50% as a result of faster, more efficient harvesting. In addition, farmers who own harvesters often provide harvesting services to other farmers, which promotes entrepreneurship and creates new sources of income for their farms and their families. This increased efficiency allows farmers to reallocate resources and labor to other activities, thus diversifying their products and revenue streams and making it economically feasible for a family to put their children through school. By offering reliable and affordable options for generators, HBC provides a critical service to this market.

A Completed Exit

SEAF fully exited Hoa Binh Corporation in May 2014 through Hoa Binh’s stock re-purchase program.