Steel Pipe Industry, Indonesia’s biggest producer of steel pipes by capacity, will raise Rp855.5 billion ($88.2 million) from its initial public offering after fixing the price below the mid-point of the indicative range.
The deal is the first IPO in Indonesia this year, according to Dealogic. The international roadshow ended on Monday (February 4) and will be followed by a retail offer that will run from February 14 to 18. The trading debut is scheduled for February 22.
The deal drew strong demand from both domestic and international investors. The buyers included a good mix of domestic pension funds and insurers, as well as international long-only funds and hedge funds, a source said yesterday.
Steel Pipe offered to sell up to 2.9 billion new shares at a price between Rp260 and Rp390 a share for a potential deal size of up to $114 million. The company will sell the maximum number of shares, but the final price was fixed at Rp295 each, capping the total proceeds at $88.2 million.
As of yesterday, the intention was to allocate 97% of the deal to international and domestic institutions, while the remaining 3% will be offered to retail investors. The total offering represents 40% of the enlarged share capital, and there is no greenshoe option.
The IPO price values the company at a 2013 price-to-earnings ratio of slightly more than nine times, the source said.
Steel Pipe makes a wide range of steel pipes, tubes and other related products, and supplies the oil and gas, automotive and furniture industries. Its clients include companies such as Honda, Yamaha and Chevron.
There are no direct comparables as it is the only company of its kind in Indonesia. But for some guidance on valuation, investors looked at steel companies in China as well as steel pipe companies in Malaysia and Korea, according to the source.
Steel Pipe plans to use part of the proceeds to fund the establishment of a new production facility in Gresik, to expand its existing facility in Karawang, and to improve and upgrade its existing facilities in Surabaya and Pasuruan. It also intends to use some of the money to repay a bank loan.
Nomura was the sole international selling agent for the deal, and a joint bookrunner together with AAA Sekuritas, which is a domestic underwriter.
Indonesian stocks are maintaining their upward momentum after gaining 13% last year. The Jakarta Stock Exchange Composite Index rose 0.4% yesterday, bringing its year-to-date gain to more than 4%.
The value of Indonesian IPOs reached $1.4 billion last year, down from $2.3 billion in 2011, according to Dealogic.