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NEWS UPDATES Asean Affairs        14  February 2011

Indonesia looks at Garuda's poor IPO

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The Indonesian government said it would evaluate what went wrong with Garuda Indonesia's share offering last week in order to improve future share sales for state-owned enterprises.

Hatta Rajasa, the coordinating minister for the economy, said the evaluation of the initial public offering would help increase transparency and accountability for future IPOs.

"Timing is very important," the minister said. "The evaluation does not mean that we will make it harder for state companies to carry out IPOs."

The long run-up to the flag carrier's IPO was marked by numerous delays that saw the offering miss last year's bull market. During its trading debut on Friday, Garuda's stock price opened at Rp 750 per share and fell as much as 23 percent before eventually settling at Rp 620.

The underwriters initially set a price range of Rp 560 to Rp 850 for the offering, but State Enterprises Minister Mustafa Abubakar balked at the assessment, saying the price should be higher.

The ministry set Garuda's share price at Rp 750 to Rp 1,100 per share. It also scaled back the volume of shares to 6.36 billion from 9.3 billion, and set the allotment for foreign investors at 20 percent to cope with lukewarm investor interest.

Harry Azhar Azis, deputy chairman of Commission XI for financial affairs at the House of representatives, said it was considering summoning Mustafa to explain the poor showing.

"We want to know how the SOE Ministry coordinated with the government's privatization team and how this happened," Harry said on Sunday. "What kind of market mood and trend forced the IPO to go ahead?

"We want all of this to be more transparent, because it is our [country's] money after all."


ed if Garuda's mediocre market showing would affect other state and private offerings this year, Pardomuan Sihombing, head of research at Recapital Securities, said it was "unpredictable" because the market had become so volatile.

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