Wed, 02 Jul 2003

Mandiri launches IPO amid positive sentiment

Dadan Wijaksana, The Jakarta Post, Jakarta

Bank Mandiri, the country's largest bank, starts its three-day share offer to the public on Wednesday in what some analysts said would likely be a major success story.

The initial public offering (IPO) will be launched in the country's two largest cities of Jakarta and Surabaya with Danareksa Sekuritas acting as the underwriter.

"I believe the demand for the shares in the IPO will be strong due to a combination of a fairly good price and the bank's relatively good prospects," an analyst at a state-owned bank told The Jakarta Post on Tuesday.

The government last week set the price of the IPO at Rp 675 per share, and said also that the shares were 6.5 times oversubscribed.

The price represents close to 1.1 times the bank's book value, and is lower than that of Bank Central Asia (BCA), Bank Niaga and Bank Danamon, whose shares were earlier sold at more than 1.2 times their book value.

"Also helpful are the aggressive marketing efforts by the bank. That helps in term of raising public awareness of the plan," the analyst added.

Mandiri, whose total assets stand at some Rp 250 trillion (US$30.5 billion), will pour 20 percent of its shares (around 4 billion shares) into the market during the offer period.

But, even before that, the bank has undertaken a massive publicity campaign which -- coupled with a variety of marketing innovations -- has aroused great public interest in the sale, and even helped create positive sentiment in the market.

Since the IPO plan became certain two months ago, after two years of waiting, the bank's management has paced its marketing efforts to attract investors, both institutional and retail, through a major advertising campaign in the media.

Some marketing innovations were also introduced to serve as inducements for retail buyers.

For instance, five luxury cars are up for grabs by lucky investors, although this will be limited to buyers who are also Bank Mandiri customers, aside from pledges to allocate 50 percent of the bank's 2003 net profit in dividend payments to shareholders.

All this has proved helpful in improving sentiment on the stock market, and has helped lift the shares of a number of banks.

Stock traders said investors see the plan as a significant effort to instill confidence in the industry.

Fauzi Ichsan, a StanChart economist, said earlier that a successful IPO would help strengthen the rupiah to a level of around Rp 8,000 as demand for the local currency was expected to be high in the near future.

The demand for the rupiah would especially come from foreign investors wishing to take part in the plan, Fauzi said.

The government has repeatedly said that, of the total shares on offer, it expects two thirds of them to be snapped up by foreigners.

Meanwhile, an official in the agency in charge of the IPO's investor and media relations told the Post that despite the shares being sold in only two cities, investors from the regions could also participate by contacting local branches of Danareksa and its affiliates across the country.

"Danareksa has plenty of affiliated securities and brokerage firms in other cities. Local investors can use them if they cannot call in at Danareksa's main office here," he said.

"For those in Jakarta and Surabaya, we also provide services for walk-in investors visiting our counters. Danareksa will help them get access in the IPO."