The airline company, Lion Air, is rumoured to have begun working on its Initial Public Offering (IPO). Corporate Communications Strategist from the company, Danang Mandala Prihantoro has recently stated that the firm is still analyzing market conditions, however, no denial was found when Danang was asked about the reported IPO. With a targeted fund of US$1 billion or around Rp14 trillion, Lion Air will mark the third-largest IPO ever recorded in Indonesia bourse. The company has reportedly submitted to IDX and further, Lion Air will enter the infrastructure, utilities, and transportation sectors by the end of this year. If actualized, Lion Air will become the fourth commercial airline company listed on the IDX after Garuda Indonesia (GIAA), AirAsia Indonesia (CMPP), and the MNC Group-owned Indonesia Air Transport (IATA).
The company is now facing tough competition in raising capital amidst unprofitable global economic circumstances. Data indicates that the targeted amount of financing maybe too high of a dream to achieve. While the bulk of demand for any IPO equity raise certainly will come from investors outside Indonesia, Indonesian law currently caps foreign ownership of locally flagged airlines at 49%. Head of Research from PT Samuel Sekuritas, Suria Dharma, reckoned that the fund target of Rp14 trillion is hard to achieve locally amidst current market volatility. To compare, even Garuda Indonesia, a giant in Indonesia’s airline industry, only reached funding amounting to Rp13 trillion from their IPO earlier in 2011 for their market value. Suria also said that the tendency of oligopolism in the industry adds further complications for the company. Moreover, Panin Sekuritas Research Analyst, William Hartanto, evaluated that Lion Air’s IPO will not be as appealing to the public, as the company was behind some of the recent airline disasters in recent years, with the most recent one being the Flight 610 tragedy in October.
Furthermore, Lion Air will have quite stiff competition in raising capital on the Jakarta market, as in spite of unfavorable global economic conditions, more than 20 companies have formally registered with the IDX to conduct IPOs before the end of the year. Intentionally, Lion Air will shortly conduct a mini expose showcasing their initial plans for their IPO espoused by IDX. Despite the turmoil Lion Air had before, sources believe that Lion Air IPO is going to be the one of the largest recorded stock in IDX when looking back at the past few years, since a successful IPO will mean a total targeted number of 10 trillion new stocks in circulation.
Sources:
CNBC
CNN
Investasi Kontan
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