Tax amnesty boosts Telkom Indonesia share sale

Indonesia’s second-largest public company raised a more-than-expected $250 million on the back of improved market sentiment.

Telekomunikasi Indonesia raised $250 million late on Tuesday, more than double its original target, as the company took swift advantage of the improved market mood in Jakarta following news of a tax amnesty that is seen boosting capital inflows into the country. 

Indonesia's largest telecommunications services provider raised the funds by placing treasury shares, meeting with strong investor demand as the bellwether national stock revved up to hit a new record-high price. 

Jakarta’s approval on Monday of the long-awaited tax amnesty law more than offset the negative sentiment brought about by Britain’s surprise decision last week to withdraw from the European Union, lifting local shares. 

The law, which has dragged on since the beginning of the year, is supported by investors because it is expected to draw Rp560 trillion ($42.5 billion) of capital into the country, according to central bank estimates. Under the amnesty, tax evaders will be freed from past tax debts if they voluntarily report undeclared assets between July and March next year. Assets repatriated between July and September will be subject to a 2% tariff, which goes up to 3% between October and December and 5% between January and March next year.

These capital inflows, in turn, should provide a much-needed boost to government funds as it seeks to increase spending on infrastructure to support economic growth. According to Singapore-based OCBC economist Wellian Wiranto, Indonesian GDP growth this year could accelerate by 0.1 percentage points to 5.2%, as a result of the amnesty.

Against this improved market backdrop, Telkom Indonesia was able to increase the treasury share sale by slightly more than 100% from the $123 million base offering at launch.

Record high

The share sale was completed at the stock’s Rp3,820 Tuesday close, which at the time was close to its all-time high of Rp3,920. According to Indonesian regulations, companies are forbidden to sell treasury shares at a discount.

The share price subsequently rose by nearly 4% on Wednesday to close at a new record high of Rp3,970.

One source familiar with Telkom Indonesia said the deal was well-flagged among investors and that the relatively small deal size meant it was relatively easy to digest. The upsized transaction size was roughly 10 times the three-month average daily volume of shares.

The deal's upsizing also underscored heavy demand for large and liquid Indonesian stocks as investors become more bullish about the country’s economic outlook, the same source said. Telkom Indonesia is the country's second-largest public company with a market capitalisation of $29 billion.

After the treasury share sale, Telkom Indonesia's free float has been increased to 47% from 46.2%.

Credit Suisse and Bahana Securities were joint bookrunners of the treasury share sale.

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