BlueBird IPO has meter problems

From humble beginnings the Indonesian taxi firm’s goal is to expand its fleet to beyond 30,000 during the next few years. But a planned IPO remains elusive.

If New York is known for having yellow taxis and London for black ones, Jakarta may soon be synonymous with blue cabs.

Blue Bird, a third-generation family-run taxi operator, has been whisking locals and international travellers alike around Jakarta for the past four decades.

Founded by the late Mutiara Djokosoetono in 1972 with 25 cars, Blue Bird now boasts a fleet of more than 30,000 vehicles and operates across 17 cities in Indonesia. It intends to hold an initial public offering to take it to the next stage of its evolution.

“I think it’s fairly straightforward. It is size and brand. If you talk with people across Jakarta – whether it’s the person that uses the regular taxis or the executive taxis – they put faith in the quality of service,” a person close to the deal told FinanceAsia.

Repeat customers – and there are many – say the company’s reliability, clean cars and knowledgeable drivers are why it’s been around for so long.

Djokosoetono would no doubt be proud of her project. Her children became the second-generation of operators.

All trained as doctors but set up practices in the afternoon so they could manage the company in the morning, at the behest of their mother, who died in 2000.

The third-generation is represented by a daughter, president director Noni Purnomo, and two sons of the siblings.

“My grandmother started the business and everyone in the household helped out. Even the maid was involved. Our house was also the office ... so I hung out with the drivers and all the employees when I was five,” Purnomo told FinanceAsia. From that age she counted the drivers’ money at the end of each day.

Purnomo said her grandmother was very “hands on” and would go to the depot every day at 4am to ensure the cars were in “perfect condition”. “If a car wasn’t clean, she would grab a water bucket with soap and wash it herself,” she said.

From humble beginnings Blue Bird’s goal is to expand the fleet to beyond 30,000 during the next few years.

To help it do this, the company targeted a December listing in Indonesia, which would have been the country’s largest IPO since state airline Garuda Indonesia raised $524 million in January 2011.

But the listing was postponed after the Indonesian regulator failed to grant approval due to a pending family lawsuit. The suspension capped off a difficult year for Indonesia’s stock market, which was pummelled as investors yanked billions out of emerging markets amid fears that the US Federal Reserve would soon halt its bond purchase programme.

After peaking in May, the Jakarta Composite Index dropped 24% to the end of August. It finished the year down just 1%, buoyed by a second half recovery.

But sentiment may now be changing. The Jakarta Stock Exchange is up 9% up to March 12, and market participants seem optimistic that a Blue Bird listing can be resurrected this year.

Bankers close to the deal expect the company to float 20%-30% of its taxi, limousine and bus service, raising $400 million in the process.

“We were hoping to execute the deal at the end of last year but it didn’t happen,” said the person close to the deal. Although declining to offer specifics, the person noted these particular lawsuits “are not unusual in a family business, particularly when families become extended”.

“It’s the regulator’s job to take the time to make sure [these disputes] won’t have an impact on the company and… on the minority shareholders who buy shares in the company,” the person said. “We expect the IPO will happen this year. We’re finalising outstanding details.”

Bankers echoed the cautious sentiment and declined to offer any specifics.

Timing unclear

No one is pinpointing a date for the listing while Indonesia’s presidential elections in July could lead to some market volatility and provide further reason for leaving the Blue Bird IPO in cold storage.

"The problem we’ve got, in terms of anyone wanting to come to market, is the elections,” the person said. “It depends on what market performance is like around those elections as to what the best window is.”

UBS, Credit Suisse and local broker Danareksa are bookrunning the deal.

There will undoubtedly be challenges. “There are a number of factors, including market competition, the ability to hire drivers and to maintain its service quality as business grows, as well as the maturing of the Jakarta market,” said Maynard Arif, head of research at DBS Vickers in Indonesia.

However, if its sole listed competitor – Express Transindo Utam – is anything to go by, Blue Bird could soar once it goes public. Express Transindo has risen 170% since its November 2012 listing.

In addition to raising fresh capital to fund its expansion – which could eventually lead to operations overseas – Blue Bird is looking to tap into the country’s rising affluence, a theme that could help boost profits for years to come.

There are 74 million Indonesians classified as middle class, which will double by 2020 to roughly 141 million people, according to the Boston Consulting Group. And each year for the next six years, some 8 to 9 million people will accumulate enough wealth to become thought of as middle class.

However, there’s more to the story than the country’s growing affluence. Indonesia’s infrastructure – or lack thereof – means taxi operators should continue to thrive, at least until the government provides dependable trains, buses and monorail systems.

“The reality is Indonesia has grown so fast for a number of years now and the infrastructure hasn’t been able to keep up. This is particularly acute in Jakarta,” the person said.

Bus services are limited, overcrowded and unreliable. It’s a similar story for trains and the lack of sufficient water pipes and drainage systems lead to constant flooding problems during the rainy season in Jakarta.

Government officials have pledged to invest billions on the country’s infrastructure, including roads, buses, railroads and airports. But completing these projects will take years. And during this time, taxis will remain the best form of transport.

“Companies like Blue Bird have been able to benefit from the growing affluence of Indonesians because they have more disposable income. But they’ve also [benefited] from the lack of infrastructure. There’s very little choice,” the person said.

Blue Bird separates itself from the competition in other ways as well.

Most taxi drivers in Southeast Asia own the cars they drive and, as such, are responsible for paying for maintenance. This puts a lot of risk on the drivers and not the company.

Blue Bird, however, owns all of its fleet and is therefore entirely responsible for the maintenance of the vehicles. It’s an appealing model as it takes a lot of the pressure off the drivers.

The company also has a reputation for returning lost items to customers, a rarity in the region. “If you lose anything in a Blue Bird taxi, they pride themselves in returning it,” the person said.

¬ Haymarket Media Limited. All rights reserved.