National carrier Vietnam Airlines is seeking to raise $51 million in an IPO that will only offer a small fraction of the firm's shares to the public and which values the company at $1.5 billion.
The government plans to retain 75 percent of the company while also selling 20 percent to a strategic partner or partners, which could be other carriers or investment firms, according to state-run media that quoted a company proposal submitted to the transport ministry. Some shares will also be offered to staff.
Vietnam is planning more than 430 IPOs for state-run companies this year and in 2015, but only a few - including Vietnam Airlines, mobile network operator MobiFone and garment firm Vinatex - are expected to catch the eye of foreign investors.
The airline's IPO has faced bureaucratic delays for several years and comes as competition from ambitious low-cost carrier VietJet Air heats up. Its rival agreed last year to buy $9 billion worth of planes from Airbus Group NV over the next decade and plans to list in two years, likely outside Vietnam.
The valuation for Vietnam Airlines implied by the IPO is, however, less than one of $2.7 billion given by financial advisers last month.
The person working on the IPO said the government made an exception and allowed the airline to use its current book value as the basis for the IPO, as the one suggested by advisers would have resulted in increased depreciation expenses in the future. The person declined to be identified as the matter is still a proposal.
Vietnam Airlines plans to offer as many as 49 million shares, equivalent to up to 3.5 percent of the company, at a price of 22,300 dong ($1.05) per share, media reported. That price is, however, not final as it needs government approval.
The government could reduce its stake in the airline to as low as 65 percent in the future, the Dau Tu investment newspaper quoted the airline's chairman, Pham Viet Thanh, as saying.
The person working the IPO said all shares, except those held by the government, would be new shares.
The proposal gave no specific date for the IPO, but it is expected to come within three months after the prime minister approves the airline's privatisation plan.
The carrier will list on the Ho Chi Minh Stock Exchange but the timeline for that is also unclear. In Vietnam, a listing can take up to a year after an IPO.
Vietnam Airlines commands more than 60 percent of the domestic air travel market. Its first-quarter net profit before tax climbed 19 percent from the same period a year earlier to 479 billion dong ($22 million), according to state media.
The firm also projected return on equity of between 14.42 percent and 18.97 percent in 2016 and expects to pay "attractive" dividends to shareholders, according to the proposal.