Thai Corporates Rush to Sell Subsidiaries as Economic Slowdown Bites

 

Thai listed companies are accelerating the sale of subsidiaries and investment assets both domestically and abroad as the kingdom's economy continues to struggle with structural challenges following the Covid-19 pandemic.

 

The wave of corporate restructuring reflects the private sector's efforts to manage capital and preserve liquidity during a period of heightened economic uncertainty.

 

Thailand's economy remains heavily dependent on tourism and exports, both of which have failed to signal a meaningful recovery whilst facing increased vulnerabilities.

 

The Thai GDP growth rate remains amongst the lowest in ASEAN, with problems stemming from high debt levels and deteriorating credit quality.

 

This has prompted financial institutions to tighten lending criteria, creating an uneven economic recovery pattern across the country.

 

 

 

Major Divestments Signal Strategic Shift

Several prominent Thai corporates have announced significant asset sales in recent months.

 

Siam Cement Group (SCG) is proceeding with plans to reduce its stake in PT Chandra Asri Pacific Tbk (CAP), an Indonesian petrochemicals producer, by 10.57% from its current 30.57% holding. The move is designed to reduce financial burden and reallocate capital for future business opportunities.

 

Energy conglomerate Banpu has sold 10 solar power projects in Japan to Actis LLP-managed entities for ¥19.764 billion (approximately 4.46 billion baht), as part of its long-term growth strategy and investment management approach.

 

Construction giant CH. Karnchang (CK) disposed of 418.67 million shares in Luang Prabang Power Company (LPCL) to TTW Public Company for 2.765 billion baht, whilst retaining a 10% stake in the Laotian power company.

 

 

Property and industrial estate developer Amata Corporation sold its entire stake in Thai-Chinese Industrial Estate Development Company 2 (TCR2) to the original Thai-Chinese Industrial Estate Development Company (TCR) for 1.871 billion baht, citing cost reduction benefits from consolidating management of adjacent industrial estates.

 

 

 

Energy Sector Leads Restructuring Wave

The energy and utilities sector has been particularly active in asset disposals. Thai Solar Energy (TSE) sold a 60% stake in Thai Solar Renewable (TSR) to Levanta Renewables (Thailand) for 1.791 billion baht to fund new renewable energy projects.

 

BTS Group Holdings divested two subsidiaries - The Community One and The Community Two - to U-Tapao International Aviation for 625 million baht to enhance liquidity.

 

Super Energy Corporation (SUPER) sold its entire stake in Tantawan Solar to Levanta Renewables for 536 million baht, whilst Prime Road Power (PRIME) disposed of seven solar projects in Taiwan to Jiayu Energy for 476 million baht.

 

 

 

Banking Sector Acknowledges Growing Fragility

Senior banking executives have acknowledged the increasing fragility in the corporate sector.

 

Payong Srivanich, Chief Executive of Krung Thai Bank, admitted to seeing growing signs of vulnerability amongst large corporates, reflected not only in the bond market but also through declining operational performance and reduced liquidity.

 

"The deterioration in business this time is comprehensive, both domestically and internationally, from supply chain impacts, tourism economics, and domestic consumption in various countries," Payong noted.
 

 

Pipit Aneaknithi, Chief Executive of Kasikornbank, observed that the uncertainty and volatility affecting small and medium enterprises and retail customers is now spreading to large corporates, with increasing signs of weakness in payment patterns and debt servicing.

 

 

Central Bank Warns of Structural Risks

The Bank of Thailand's assessment of financial system stability for 2024 and outlook for 2025 identifies several risk factors that could impact financial stability.

 

These include fragile investor confidence sensitive to both domestic and international factors, trade policies of major economies, and certain business sectors experiencing slow recovery with structural problems and competition from China.

 

The central bank noted that whilst large corporations generally maintain good financial positions, continuously high debt levels represent an accumulation of vulnerability that reduces their ability to withstand negative shocks, particularly for highly leveraged companies with revenues and debt servicing capacity sensitive to economic conditions.

 

 

 

State Enterprise Response

State-controlled PTT Public Company has announced it will focus on core businesses and exit non-related activities.

 

The energy giant has already discontinued its fruit transportation by rail logistics business and is studying approaches to address the downturn in petrochemicals, including potentially seeking foreign partners for its chemical subsidiaries.

 

Chief Executive Kongkrapan Intarajang emphasised that PTT will concentrate on businesses with synergies to its core operations whilst reducing redundant investments to create stronger revenue streams.

 

 

Market Outlook Remains Challenging

Suksan Yasasin, Chief Executive of debt management company Chayo Group, observed that companies across all sizes are increasingly divesting businesses due to economic slowdown and heightened uncertainty.

 

The trend has been evident for six months but has become more pronounced over the past three months.

 

"The trend of companies bringing assets to sell to us has been clear for six months and has become much more evident in the past three months, mainly due to the economic slowdown impact causing business revenues not to recover, requiring more liquidity, or some businesses starting to decide to sell because profits may be declining," Suksan explained.

 

The widespread corporate restructuring underscores Thailand's ongoing economic challenges as the kingdom struggles to regain its pre-pandemic growth trajectory of 3.0-3.5%, with structural issues requiring significant time and policy intervention to address effectively.