The Federal International Finance Group (FIF Group) issued bonds on Wednesday to raise funds in order to help the motorcycle finance company achieve its financing target this year, amid new competition from financial technology companies.

FIF Group, a subsidiary of diversified conglomerate Astra International Indonesia, raised Rp 1.3 trillion (US$87.13 million) in fresh funds from the bond issuance, lower than its initial target of Rp 1.5 trillion.

“Our financial needs are huge this year, especially considering that in 2018 we are planning to achieve a financing target of at least Rp 35 trillion,” Margono Tanuwijaya, FIF CEO, said at the Indonesia Stock Exchange (IDX) building on Wednesday.

This year’s financing was 4 percent higher than last year’s realization of Rp 33.6 trillion. FIF stated that as of August this year, it had channeled Rp 23 trillion in finance.

Retail investors dominated two-thirds of the bond issuance, while the rest of the demand came from institutional investors. This was the first time FIF has expanded bond sales to the retail market with the minimum denomination of Rp 20 million, FIF Group director Hugeng Gozali said.

The bonds issued were divided into two tenures. Series A was worth Rp 639 billion with 7.5 percent interest annually, 370 day tenor and will be due on Oct. 5, 2019.

Series B was worth Rp 661 billion with fixed interest of 8.75 percent per year, a 36-month tenor and will mature on Sept. 25, 2021.

The book building period was completed on Sept. 19 and 20 this year, and the bonds were listed at the IDX on Sept. 26.

The underwriters for the bonds issuance were PT BCA Sekuritas, PT DBS Vickers Sekuritas Indonesia, PT Indo Premier Sekuritas, PT Mandiri Sekuritas, PT Danareksa Sekuritas and PT Trimegah Sekuritas Indonesia.

In terms of business prospects, Margono was optimistic that the outlook for motorcycle finance was beginning to rebound this year, backed by overall industry growth.

Last year, motorcycle sales in Indonesia amounted to 5.9 million units, according to the data from the Indonesia Motorcycle Industry Association. This year, it is predicted that motorcycle sales could reach 6.1 million units, supported by recovering purchasing power.

“We believe that the growth of FIF’s business this year will follow the growth of the industry,” Margono said.

In Indonesia, Honda dominated motorcycle sales with a market share of 74 percent as of June.

Sixty-seven percent of FIF finance was channeled for new Honda motorcycles, 23 percent for used Honda motorcycles and the rests for electronics.

Recently, FIF’s competition has come not only from traditional vehicle financial companies, but from financial technology companies that offer loans for customers.

To stay ahead of the competition, PT Astra International established a peer-to-peer lending platform under FIF Group, named PT. Astra Welab Digital Arta (AWDA).

AWDA was established in collaboration with a Hong Kong-based fintech company with an investment of $21 million.

FIF Group has issued bonds publicly since 2002, with total bonds issuance of Rp 23.75 trillion and total matured and repaid bonds of Rp 11.49 trillion.

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