As a proudly private and independent equity house, PT Indo Premier Sekuritas (IPS) strives to bring value to each of its deals and clients. Its IPO achievements in 2018-2019 include BRI Syariah (BRIS), MAP Aktif Adipersada (MAPA) and GarudaFood (GOOD).
Each transaction was unique. BRIS was the largest IPO for an Indonesia Islamic bank, helping its holding company Bank BRI (BBRI) become the largest bank in Indonesia.
The IPO of MAPA followed by its 144A placement deal, highlights IPS’ strength in utilising market timing and momentum by leveraging the strength of the Indonesian consumer retail sector. And IPS successfully helped GOOD to list in difficult market conditions. Moleonoto The, PT Indo Premier Sekuritas' Chief Executive Officer, shares his insights with FinanceAsia about what’s driving Indonesia’s dynamic IPOs and issues facing its unicorns.
Q Indonesia is a powerhouse in fostering unicorns. What opportunities for investment are there if unicorns proceed to IPO?
A Indonesia is a perfect staging ground for growing unicorns. It has an attractive demographic profile, robust economic growth, growing consumption backed by middle class purchasing power, increasing internet penetration through mobile phones and improving digital infrastructure.
This background combined with creative minds, entrepreneurial spirits, and the right timing helped created many tech start-ups. With the backing of venture capital and private equity (PE), some of these have become unicorns. Going to IPO is an important milestone for unicorns as they gain access to public investment with a larger pool of funds, and will be able to increase their scale. An IPO also helps early investors to realise their investments.
Concerns around unicorns going to IPO traditionally revolve around valuation. Some unicorns are clearly dominating their market, with massive funding support. However, questions usually arise in relation to their profitability at the time of IPO, or how long they will be able to achieve sizeable profit post IPO. There is also concerns regarding the legal framework to allow this new type of company to list on the Indonesia Stock Exchange (IDX).
Q If large unicorns do IPO, where do you recommend they do this?
A If they go to IPO, we think the IDX will be the right venue for them to list. IDX represents a market with tremendous growth opportunities for corporate fund-raising. Many large international institutional investors have tapped directly into Indonesia’s equity market through international brokers and direct market access. Both IDX and the government support start-up companies tapping equity capital markets.
This support includes easing listing rules for equity crowdfunding, accelerated board listings and relaxing rules about profitability, but a major hindrance remains, mainly related to allowing listing of different classes of shares.
Q Is the global slowdown likely to affect the flow of foreign investment into unicorns?
A Indonesia’s unicorns offer exceptional growth potential to investors, given the tremendous opportunities with mobile internet usage through smartphones and the rise of consumer spending. This has been a major attraction for foreign investments amid global slowdowns in the past.
However, to sustain growth, this area should be supported by enforcement of propriety rights and rule of law, as well as a more open policy for foreign investment.
Q What risks are associated with tech start-ups tapping the stock market, given current volatility?
A Tech startups are certainly valued differently compared to the traditional companies, on the back of their disruptive business models that are able to deliver stellar growth, albeit at a higher cost. The risk is always related to the question of how these startups can deliver profitability.
PT Indo Premier Sekuritas