State-owned pawnshop firm gets OK for public offering

The government will likely approve state-owned pawnshop firm PT Pegadaian’s initial public offering (IPO) plan, a senior minister says.

Pegadaian had planned to go public in the second half of the year until the State-Owned Enterprises Ministry asked the firm to reconsider its plans since, as a publicly traded company would sacrifice its social mission to help the poor.

However, State-Owned Enterprises Minister Dahlan Iskan said in Jakarta on Thursday that it would be no problem for Pegadaian to go public as long as it would not operate completely as a profit-oriented company.

“The main concern was that Pegadaian would impose high interest rates in order to boost its profits,” Dahlan said.

However, Dahlan added, if the company promised to provide affordable rates for its services, the ministry would not object to the IPO.

Dahlan announced earlier this year that at least three more state-owned companies intended to float their shares on the Indonesia Stock Exchange (IDX) this year.

Eighteen state-owned companies are currently listed on the bourse.

“There will be new thoughts concerning Pegadaian’s plan for going public. We will ask commitment from the company to maintain interest rates at a low level. If Pegadaian agrees with the principle, the IPO plan can be proposed again,” Dahlan said.

He cited that a commitment to maintain interest rates at a low level was necessary, even though the company’s low-income customers comprised only 5 percent of its total customers.

“We still need to protect the 5 percent and asked Pegadaian to make a special commitment for them,” Dahlan said.

Pegadaian president director Suwhono said that the pawnshop firm would remain committed to serving low-income people.

“If we are allowed to hold the IPO, we will carry out our mission to improve the welfare of the society as stipulated in our articles of association,” Suwhono said.

Suwhono added that Pegadaian had cut its interest rates to 1.15 percent from 1.2 percent early this month.

“We remain committed. We also set interest rates for the 5 percent low-income customers at 0.975 percent,” Suwhono said.

Suwhono added that Pegadaian was ready for the IPO.

“We are waiting for the implementation.”

He declined to reveal the amount of his company wanted to raise from the capital markets.

The pawnshop firm recently said that it needed around Rp 7 trillion this year to support its lending.

Money raised from the IPO would add to exiting funding streams such as bonds and bank loans.