Hospital operator PT Mitra Keluarga Karyasehat is slated to have the largest share float so far this year, looking to pocket nearly Rp 4 trillion (US$312 million) from an Initial Public Offering (IPO) next month. A quarter of the proceeds will be used to support its massive business expansion.

Mitra Keluarga, which is an affiliate of the country'€™s largest pharmaceutical company, Kalbe Group, announced Thursday it aimed to release 261.91 million shares in an IPO, equal to 18 percent of its enlarged capital.

The company has slated an offering period of March 17-18, before a scheduled stock market listing later in the month.

Mitra Keluarga has appointed Kresna Graha Sekurindo, Deutsche Securities Indonesia, Morgan Stanley Asia Indonesia and UBS Securities Indonesia as underwriters.

Michael Steven, president director of Kresna Graha Sekurindo, lead underwriter for the IPO, said the shares would be offered at between Rp 14,500 and Rp 15,000 a piece, meaning that Mitra Keluarga expected to raise up to Rp 3.93 trillion from the offering.

Out of the total shares to be floated to the public, 189.16 million are divested by Lion Investment Partners BV, which currently holds 66 percent of Mitra Keluarga. Proceeds from the sales of the divested shares, around Rp 2.74 trillion to Rp 2.84 trillion, will be given to Lion as the seller.

The remaining 72.75 million shares to be issued, Steven said, were new shares, the proceeds of which would be used to fund Mitra Keluarga'€™s business expansion.

Thus, Mitra Keluarga would allocate between Rp 1.02 trillion and Rp 1.09 trillion from the IPO funds to support its business growth.

'€œAbout 56 percent of the funds will be used to establish new hospitals, 20 percent to purchase new medical equipment and IT infrastructure, 16 percent for land acquisition and 8 percent to expand its current hospitals,'€ he explained.

Mitra Keluarga president director Rustiyan Oen said that the company intended to open seven new hospitals in Greater Jakarta and in Surabaya, East Java, in the next five years. Each of the hospitals would cost the company around Rp 300 billion, Rustiyan said, thus requiring Rp 2.1 trillion in investment.

'€œWe are planning to have one new hospital this year and two more next year,'€ he said.

The company currently operates 11 hospitals '€” seven in Greater Jakarta, three in Surabaya and one in Tegal, Central Java '€” with total bed capacity of 2,000 catering to 2 million patients a year.

Rustiyan said he was upbeat that the hospital business would remain positive over the next five years because there were no big players in the industry and there was a lack of hospitals across the country.

The improving economy and growing middle class had spurred demand for better medical services.

There are currently three companies running hospital businesses listed on the bourse, the largest of which is Siloam International Hospitals.

'€œWe are upbeat [that the offered shares will be absorbed] with high enthusiasm from investors and based on the good financial performance the company has shown so far,'€ Steven said.

Mitra Keluarga'€™s first nine-month financial result in 2014 showed the company'€™s revenue had increased 11.1 percent year-on-year to Rp 1.47 trillion, while its net profit had gone up 25.9 percent to Rp 405.61 billion as of September.

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