P

ublicly listed financing firm Adira Finance (ADMF), which is owned by major lender Bank Danamon, plans to collect up to Rp 4 trillion (US$317.7 million) from two bond issuances this year to support its automotive financing business amid weak vehicle sales.

The bond issuances are expected to be conducted twice this year within the first and second half respectively as part of a wider plan to raise a total of Rp 9 trillion from the debt market within the next two years, finance director I Dewa Made Susila said.

'€œWe will issue twice because it will be difficult for a debt paper worth Rp 4 trillion to be absorbed at once by the market. As we have often done previously, each of the issued bonds will be around Rp 1.5 trillion to Rp 2 trillion,'€ Made said. The company has announced its plan to capital market regulator the Financial Services Authority (OJK) but has yet to determine the exact timing for the bond issuances.

To aid its financing plans, Adira Finance has already obtained a Rp 20 trillion joint-financing fund from its parent company and is in the process of obtaining Rp 10 to Rp 12 trillion in loans from domestic and overseas banks. The company has also pocketed Rp 1.5 trillion from its previous bond issuance and Rp 133 billion from an Islamic bond (sukuk) issuance last year.

The company is looking to grow financing moderately by 5 percent this year on the back of weaker vehicle sales expected this year as economic conditions remain challenging.

'€œAssociations of vehicle producers have predicted that automotive sales will remain flat in 2015. We will revise our target if there is a sudden positive trend in the market,'€ Made said.

The Association of Indonesian Automotive Manufacturers (Gaikindo) has said it expected that car sales would remain flat at 1.2 million units this year, the same figure as last year when sales declined 2 percent from 1.22 million units in 2013.

Meanwhile, motorcycle sales nationwide were likely to drop by a single digit this year from 7.9 million units last year, growth of only 2 percent from 7.8 million units in 2013, according to the Indonesia Motorcycle Manufacturers Association (AISI).

Weaker vehicle sales have affected Adira Finance'€™s business, which saw only a slight 1.18 percent growth in financing to Rp 34.1 trillion in outstanding, according to its financial report.

More than half of the company'€™s financing (55 percent) went to motorcycles, while the remaining 45 percent was allocated to commercial and personal four-wheel vehicles.

Adira Finance'€™s net profit halved last year to Rp 792 billion from Rp 1.7 trillion in 2013. '€œThe drop in net profit last year was mainly due to increases in costs of funds and operating expenses as well as changes in accounting treatment,'€ Made said.

Slowing economic growth as well as commodity prices and rupiah depreciation have hurt Adira Finance'€™s financing over the past few years, according to Made.

Shares in Adira Finance, traded under the code ADMF, closed unchanged at Rp 6,850 on Friday. The stocks have dropped almost 5 percent so far this year, underperforming the broader Jakarta Composite Index'€™s (JCI) 2.2 percent gain.