Initial Public Offering (IPO) Indonesia: Made Easier to Go Public

Tito Sulistio, General Director of the IDX, said that in theory it should only require some 13 weeks for a company to complete an initial public offering (IPO) on the Indonesia Stock Exchange (IDX). However, in reality it can take up to one year for a company to go public in Indonesia. This is primarily caused by companies' hesitation to act. Sulistio therefore says owners and the management of companies need to become aware that the process to list on the IDX is not as complicated and expensive as imagined. Moreover, companies tend to delay IPOs when there exist negative market sentiments. Although this makes sense as negative market sentiments will curtail investors' appetite for shares at a company's trading debut, Sulistio says the companies should focus on the long-term advantages of an IPO rather than short-term emotions.

This year the IDX targets to welcome 35 new companies on the local bourse, an ambitious target given financial and stock markets, worldwide, are plagued by a high degree of uncertainty due to the "Brexit" issue, looming tighter monetary policy in the USA, China's economic slowdown, and low commodity prices. Last year, only 16 companies conducted an IPO in Indonesia. Still, Sulistio remains optimistic, saying that in the next couple of weeks two companies are to be added on the Indonesia Stock Exchange, while between seven and nine companies that have expressed their interest to list on the IDX are currently being processed by the OJK.

Per 27 June 2016 there are 527 listed companies on the Indonesia Stock Exchange. This is a low number compared to the number of listed companies on other stock exchanges in Asia: Japan (3,521 listed companies), South Korea (1,981), Hong Kong (1,899), Shanghai (1,100), Malaysia (904), Singapore (766), and Thailand (644). Given that Indonesia is Southeast Asia's largest economy, it would therefore be more "normal" to have more listed companies in Indonesia than in neighboring countries Malaysia, Singapore and Thailand. However, reality proves differently.

Awareness about the advantages of going public seems to be low in Indonesia where there exists a generally low understanding of capital markets. Most entrepreneurs simply see an IPO as a method to generate funds. Therefore the opening of information centers in the regions is a positive step. However, to encourage appetite for IPOs, the IDX may also want to consider giving fiscal incentives such as a tax holiday.

Another factor that makes it difficult to enlarge the number of listed companies in Indonesia is that most of the large companies have already conducted an IPO, while there remains a large number of big state-owned companies as well as big companies that are run - for several generations - by Indonesian families. In the Indonesian economy the big state-owned companies play a big role. However, the government is not eager to let them go public. Meanwhile, those companies that are run by families often cannot agree on the move to go public.

For the mid-sized companies in Indonesia it is generally difficult to adhere to regulatory requirements such as the requirement to provide transparent financial reports to the public. Moreover, they are usually frightened by the high costs that are involved when going public. For example, they usually have to create investment relations departments and accounting oversight committees.

Advantages for a company to go public:

• Generate fresh funds that can be used for business expansion or to pay off debt
• Raise public awareness of the company/adding a new group of potential customers
• Increase the company's market share
• Lucrative exit strategy for founding individuals
• Improved management due to mandatory higher degree of financial and corporate transparency to the public

Disadvantages for a company to go public:

• Higher costs of complying with regulatory requirements
• Adjust to a higher degree of financial and corporate transparency
• "Market pressure" causes companies to focus on short-term instead of long-term growth

Initial public offerings on the Indonesia Stock Exchange that are currently in the pipeline include Aneka Gas Industri, Protech Mitra Perkasa, Capital Financial Indonesia, and Megapower Makmur. So far this year, only six companies have listed on the IDX. Today, Duta Inti Daya will be added as the seventh company.

Last Update: 29 Mar 2021

IPOs on the Indonesia Stock Exchange up to 27 June 2016

Company	P: 29 Mar 2021	P: 28 Mar 2021	Gain/Loss	P/E ttm	Yield %	Gain/Loss YTD
Bank Artos IndonesiaARTO	10,050	9,900	1.52%	N/A	0.00%	79.46%
Mitra PemudaMTRA	244	244	0.00%	N/A	0.00%	0.00%
Mahaka Radio Integra Tbk.MARI	256	254	0.79%	N/A	0.00%	187.64%
Bank Ganesha Tbk.BGTG	146	156	-6.41%	N/A	0.00%	102.78%
Cikarang Listrindo Tbk.POWR	700	695	0.72%	N/A	0.00%	-12.50%
Sillo Maritime Perdana Tbk.SHIP	655	645	1.55%	N/A	0.00%	-5.07%
Duta Intidaya Tbk.DAYA	258	264	-2.27%	N/A	0.00%	-35.18%
Combined Total	12,309	12,158	1.24%			55.95%

Green colour indicates upward movement Red colour indicates downward movement P = price; E = earnings; D = dividend; Yield = D/P "N/A" indicates P/E < 0 (negative earnings) "-" indicates E,D,P or YTD is not available

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