Tue, 14 Oct 2003

BRI to sell 45% stake at Rp 700 to Rp 875

Rendi A. Witular, The Jakarta Post, Jakarta

State-owned Bank Rakyat Indonesia (BRI), Indonesia's fourth largest bank in terms of assets, will offer up to 45 percent of its shares to the public via an initial public offering (IPO) at between Rp 700 and Rp 875 per share.

State Minister of State Enterprises Laksamana Sukardi said this was a "good price target" for BRI, representing between 1.1- 1.4 times the bank's book value of Rp 620 per share.

"It is not an exaggeration for me to say BRI is the best bank in Indonesia. Therefore, the book value that has been set represents the value of the bank itself," said Laksamana during a meeting with potential investors on Monday.

BRI's price range is higher than that set for the country's largest bank Bank Mandiri during its IPO in July which ranged between 0.9 and 1.1 times its book value, or roughly Rp 569 to Rp 695 per share.

The BRI IPO would be the country's largest, with the government expecting to raise around Rp 3 trillion (US$361 million) in proceeds to help finance the state budget deficit.

The final pricing for the IPO will be decided on Oct. 28, while the offering is scheduled to take place from Nov. 3 to Nov. 5, and the shares will be listed on the Jakarta Stock Exchange and Surabaya Stock Exchange on Nov. 10.

Deputy for privatization at the Office of the State Minister of State Enterprises Mahmuddin Yasin said that for the upcoming IPO, the government planned to initially sell 36 percent shares, or a total of 4.23 billion shares.

In addition to that, the bank would later issue around 9 percent of new shares to raise cash for working capital.

However, BRI could only issue the shares if the demand for the bank's shares during the IPO was greater than the supply, he said.

Meanwhile, BRI finance director Wayan Alit Antara said the bank needed around Rp 3 trillion in fresh money to help boost its capital adequacy ratio (CAR).

CAR is the ratio between capital and risk-weighted assets like loans. BRI's CAR has been declining over the past few months, reaching 12.36 percent at present, down from 14.7 percent in March.

Alit expected that the right issue (new shares offering) would give BRI a fresh capital of around Rp 1 trillion, with the remaining capital to be obtained from the recent issuance of $150 million worth of subdebt plus the planned Rp 1 trillion worth of bonds issue.

He explained that with the capital injection, BRI's CAR was expected to reach 16 percent at the end of this year.

BRI said that a large part of the IPO, around 60 percent, would be allocated to foreign investors.

To attract investors to buy the shares, BRI plans to allocate 50 percent of its 2003 net profit for dividends, a promise that analysts have said is aimed at appeasing investors who are worried about the bank's declining CAR. BRI expects net profit this year to rise 37 percent to Rp 1.6 trillion from Rp 1.17 trillion last year.