Thu, 03 Jul 2003

Mandiri's IPO gets subdued response

Dadan Wijaksana, The Jakarta Post, Jakarta

The Bank Mandiri initial public offering (IPO) had been billed as one of the most important business events in Indonesia this year.

Given the fact that Mandiri is the country's largest bank and the flurry of reports weeks before the IPO saying the shares had been 6.5 times oversubscribed, many expected the IPO to represent an important milestone in reviving the public's interest in the stock exchange, which has declined greatly since the economic crisis.

Comments from many analysts who predicted the IPO would be successful also convinced many members of the public that the IPO could strongly signal the country's economic recovery.

Yet, against the expectations of most people, the first day of the IPO on Thursday appeared to be quiet.

Razzmatazz, bustling crowds, long queues of people eager to place orders for shares -- which were common sights during successful IPOs prior to the economic crisis -- were nowhere to be seen in the office in the Bapindo Plaza complex where the bank had opened its only counter in Jakarta for the registration of retail investors willing to buy the bank's shares. Another counter was operating in Surabaya.

The Jakarta counter was opened at 9 a.m. At 3 p.m., the bank's president ECW Nelloe was scheduled to visit the counter for a ceremony. But, to the disappointment of dozens of journalists and photographers, including The Jakarta Post, who had been waiting at the counter for more than an hour, he failed to show up.

Has the IPO failed to interest the public after all?

Not according to experts and people directly involved in the IPO.

"It would be wrong to draw such a conclusion. It's only day one, and we haven't even had preliminary figures suggesting that demand was low," a banking industry researcher told the Post. The public offering will last until Friday.

Efforts to seek the figures in question at Danareksa Sekurities, the lead underwriter for the IPO, and also Mandiri, were unsuccessful.

"It will take time to calculate all the figures. This is a huge effort. So, we need to wait for the completion of the whole offering, but I have no doubt that it will be a success," said Wahzary Wardaya, Danareksa's managing director.

E. Agung Setiawati, director of Datindo Entrycom, which co- organized the offering, also brushed aside suggestions of low demand.

"In fact, we only opened two counters for the offering. But, we also have a total of 24 underwriters and 55 selling agents with whom retail investors and institutions can place orders,

"It's true that there were a small number of walk-in investors. But, the number of people coming here does not reflect the actual demand. For instance, I saw one selling agent today taking orders on behalf of hundreds of investors."

The government initially planned to sell a 15 percent stake in the bank, but citing high demand from investors the government decided to raise the offer to 20 percent. The price has been set at Rp 675 per share.

Prior to the IPO, analysts said Mandiri's IPO would not only help revive investor confidence in the country's banking sector and the government's commitment to reform, but it would also help stabilize macroeconomic indicators, especially the rupiah.

Some analysts predicted that Mandiri's successful IPO would push the rupiah to above 8,000 against the U.S. dollar as demand for the local currency would increase to pay for purchases of the bank's shares. The rupiah ended higher at 8,225 on Tuesday, up from 8,245 at the previous close.