Indocitra Finance to change its core business focus

JAKARTA (JP): Publicly listed multi-financing company PT Indocitra Finance said on Thursday it was planning to convert itself into an investment firm due to the gloomy outlook for its present business activities.

Indocitra commissioner Glenn Gouw said the change in the business focus was part of the essential business strategy to keep its operation afloat.

"There is no hope for multi-finance companies such as us without fixed funding sources like banks," Glenn told reporters during a public expose held by the company.

Multi-financing firms are involved in leasing, factoring and other investment activities.

Glenn said that Indocitra was one of the many multi-financing companies that flourished during the early nineties. But with the collapse of the banking sector in 1997, most of these companies went out of business, he explained.

He said the company now only focused on recovering its loans from existing clients.

"We don't extend new loans, it's too risky. We'll just maintain our current ones," he added.

Glenn said the company had total debts of some Rp 36 billion (about US$3.82 million), of which Rp 13 billion was owed to the Indonesian Bank Restructuring Agency (IBRA).

He said the company must first complete its debt restructuring negotiations, before it could proceed with its plan to become an investment firm.

Under the plan, he said, Indocitra would become a holding company with stakes in companies involved in various business lines.

Indocitra would issue rights shares to raise funds for the expansion plan.

Indocitra's president R. Soedaryatmo said that the company planned to raise about Rp 33 billion from a rights issue this year.

The company hopes to obtain the shareholders' approval for the plan at a meeting scheduled for June this year.

But at present, Glenn continued, Indocitra was stuck with its debt restructuring negotiations.

He said that IBRA was unsure how to restructure the debts of multi-financing firms.

"We're negotiating on a one to one basis with IBRA, but we must also wait until IBRA sets guidelines for multi-financing debt restructuring," he explained.

According to him, IBRA has estimated that out of the 140 multi-financing firms, only 25 were suitable for debt restructuring, including Indocitra.

"The others have just abandoned their operations, some owners cannot be found," he explained.

For the third quarter last year, Indocitra booked a net loss of Rp 455 million, down from Rp 652 million in the same period in 1999.

But its revenue dropped during the third quarter last year to Rp 4.1 billion compared to Rp 5.3 billion in the same period the year before.

Indocitra is 83.89 percent owned by PT Citra Sari Abadi, 3.16 percent by the Bank Bukopin cooperative, with the remaining 12.95 percent being owned by the public. (bkm)