"Shark" Thuy's Egroup has been operating for many years based on financial leverage, mobilizing thousands of billions of VND, but in the end, it continuously owes money to investors, withholds employee salaries, and fails to pay tuition fees.
Mr. Nguyen Ngoc Thuy - Chairman of the Board of Directors (BOD) of Egroup Education Corporation, has just been arrested on charges of fraud and property appropriation. Previously, many investors accused Mr. Thuy of fraud through the transfer of Egroup shares.
Egroup was founded by "Shark" Thuy in 2008. The group's ecosystem spans many fields from education - training, healthcare to food. The most prominent of these is Apax Holdings (IBC) - behind the Apax Leaders English center chain, the only listed company and the designer of many large investment deals. The remaining companies, Egame and Ecapital, are the units through which Egroup raises capital.
Slow to pay interest to investors
Since 2017, Egame and Ecapital have called for investors through "strategic cooperation agreements" in exchange for shares of the parent company Egroup. According to the agreement, investors must hold these shares for a period of time (usually one year). On the settlement date, Egroup commits to finding a partner or directly buying them back at a higher price than when they were sold, or giving away a certain number of shares to re-sign a new agreement.
Initially, based on the difference in stock prices, investors could earn 20-25% profit (2017-2018), then gradually decrease to 17-18% in 2019-2020. By 2021, this profit will only be 14-15% per year.
Before 2020, Egroup paid interest in full. But from the beginning of 2020, "Shark" Thuy's company started to delay paying interest to investors because they were having difficulties in business due to the Covid-19 epidemic. After that, this business remained silent.
The same delay in interest payments also happened to bondholders at businesses in Mr. Thuy's ecosystem.
When asked, Egroup's leaders repeatedly refused to tell VnExpress the total debt amount and the investors participating in the cooperation agreement and bonds. The reason was that "weak staff so we cannot close the debt yet".
Mr. Nguyen Ngoc Thuy - Chairman of Egroup Corporation, in an online meeting with shareholders and investors, August 2023. Screenshot
According to data from the Hanoi Stock Exchange (HNX), Mr. Thuy's ecosystem in the period 2018-2021 issued 6 bond lots, more than 1,340 billion VND, interest rate 12-15%.
Unable to repay investors on time, Egroup's board of directors asked for a 3-5 year extension, up to 2028, in the most optimistic scenario. They also hope to reduce past interest and stop calculating new interest until the debt is paid. For investors who cannot wait, Egroup has come up with a plan to offset, including real estate, investment packages for "franchising" English centers, English learning, and household appliances.
Missed deadline for paying tuition fees
In addition to delaying repayment to investors, "Shark" Thuy's company also failed to repay tuition fees at Apax Leaders English centers - the backbone of Egroup's ecosystem.
Since late 2019, the Apax Leaders English center chain has been complained by many parents in Ho Chi Minh City, Hanoi, Dak Lak, and Da Nang, demanding a refund of billions of dong in tuition fees because the teaching quality was not as committed, "taking the money and abandoning the customers" and stopping operations.
After asking investors for a debt deferral, Egroup restructured Apax Leaders and announced the completion of the first phase at the end of March 2023. At that time, the chain had 38 centers, mainly in the North.
But the reopened centers also closed one after another. The management explained that the reason was low revenue, mainly from taking back old students who had paid their fees before, and new sources of money were still limited. As for the centers in Ho Chi Minh City, Mr. Thuy said they faced "particular difficulties" because parents did not agree to let their children continue studying, "besieging" them to demand tuition fees.
After many negotiations, by March last year, the company divided parents into two groups with different repayment schedules. Many parents in group 1 received their full money back, through three installments, lasting from June to August 2023. The second group was promised to pay back tuition in five installments, each 20%, expected from October 2023 to April 2024. However, Apax Leaders later reneged on its commitment and proposed a new schedule, lasting until the end of 2025.
At the end of 2023, this chain of English centers announced its insolvency. According to data from the Ho Chi Minh City Department of Education and Training, Apax owed parents here more than 108 billion VND, of which 14.2 billion had been paid, with nearly 94 billion VND remaining. This unit proposed a plan to gradually pay off the debt from 2025, paying each parent 4.5 million VND each quarter until it was paid off.
Today, Apax Leaders announced that refunds to parents have been suspended, after "Shark" Thuy was arrested for alleged fraud and property appropriation.
Why is Egroup in crisis?
In fact, the Egroup ecosystem is unstable because the operating model of the companies depends heavily on financial leverage. With Apax Leaders as the backbone, Egroup relies on capital mobilized from investors to open more education chains and schools, then expand into the fields of health care, cuisine and financial investment.
Before 2019, the Apax Leaders chain continuously opened new operating networks from North to South, with 130 teaching locations during its heyday. By the end of 2019, the company behind it, Apax Holdings, had total liabilities of about VND 1,974 billion, 2.1 times its equity.
Responding to VnExpress at the end of 2022, Mr. Nguyen Ngoc Thuy admitted that the ecosystem "faced difficulties and disadvantages in many aspects", the biggest being cash flow. Meanwhile, in an investor meeting in early August 2023, the Chairman of Egroup said that the core cause of the crisis was the business model of "rapid growth by borrowing".
But many investors have different opinions. They suspect that Egroup and Mr. Nguyen Ngoc Thuy used the raised capital to invest in securities, cryptocurrency, real estate... instead of core business activities.
Regarding this, Mr. Thuy once denied, saying that he had never invested in stocks or cryptocurrencies. But in the financial report of the subsidiary Apax Holdings in 2022 - the most recent information disclosure, this enterprise had 100 billion VND in stocks. This amount was explained as shares of the subsidiary Ecapital.
Regarding real estate, Apax Holdings once planned to invest 300 billion VND in cooperation to invest in the Hong Quang - Long Hai tourist area (Ba Ria - Vung Tau) in 2022. Previously in 2020, this enterprise also cooperated to build, exploit and develop the Vung Ang multi-purpose housing and service project (Ha Tinh).
According to Mr. Thuy, this enterprise cooperates to establish an educational infrastructure company, buys inter-level schools, buys land to build educational-related experience and resort areas... That is, in essence, it is investing in real estate to serve education.
However, the consequences of a company developing with financial leverage are the inability to repay investors and failure to repay tuition fees. Egroup has also withheld salaries and social insurance for employees for the past 5 years. A series of employees chose to quit their jobs, including many foreign teachers.
According to Hanoi Social Insurance, by the end of February, Apax Leaders owed more than VND62.5 billion in social, health and accident insurance for domestic and foreign workers. In total, the ecosystem including CMS, Igarten, Egroup, Egame and English Now owed nearly VND104 billion in insurance.
In previous investor meetings, Apax Leaders leaders repeatedly promised to refund the income and salaries owed to employees. They also promised to have a stock bonus policy for employees to "compensate" after the successful restructuring. However, up to now, many employees, including those who have quit, said they have not received their salaries and insurance debts and do not know when they will be refunded.
Mr. Pham The (Hanoi) and three family members have poured more than 3 billion VND into Egroup through various strategic cooperation agreements since 2017. When "Shark" Thuy's company stopped paying interest from the beginning of 2020 until now, his family has lost about 40% of their monthly income. But according to him, many people are even more miserable because they have mortgaged their houses, assets or borrowed money from banks to "pour" into investments at Egroup. Because at that time, the interest rate offered by this company was 5-7% higher per year than that of deposits at banks. These cases are now in a "dilemma" when the bank seizes their debt.
"Now I just hope the authorities will help my family get back the original investment, I don't care about the interest anymore," Mr. The expressed his wish after hearing that Mr. Thuy was arrested.
Siddhartha
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