Outsourcing services company Shield-On Service is aiming to use fresh funds obtained from its initial public offering (IPO) as working capital, to pay debts and for equity participation in a new company.

Shield-On Service was the 49th company to go public in the Indonesia Stock Exchange (IDX) this year. It earned Rp 41.24 billion (US$ 2.77 million) from releasing 150 million shares to the public, equivalent to 23.08 percent of its total issued and paid-up capital.

The company plans to use 71.23 percent of its IPO proceeds to repay its debts to AB Sinarmas Multifinance; 20.61 percent for equity participation at PT Human Resources Provider (HRP); and 8.16 percent for working capital.

“With the equity participation in PT Human Resources Provider, our revenue composition will change, as we will obtain more income from human resource solutions,” Prasetyo Wibowo, Shield-On Service finance director, said on Tuesday.

Human resource solutions that the firm provides to its corporate clients include talent development services, recruitment assessment services and compensation and benefit services.

With the equity participation in PT Human Resources Provider, its revenue composition would change, Prasetyo said, explaining that 40 percent of its income would come from human resource services, 30 percent from facility solutions such as cleaning services, 20 percent from security services and the rest from parking management services.

Shield-On Service manages 18,000 workers that serve big companies on a contractual basis. The outsourcing company provides customized solutions to its clients to match their business needs. Its key account clients include PT Sinarmas Forestry, state-owned railway operator KAI and various companies in the manufacturing and infrastructure sectors.

In order to expand its market reach, the company will focus on areas outside of Java Island, focusing more on cities in Sumatra and Kalimantan. Currently, revenue from cities in Java comprise 90 percent of the company’s total revenue.

“Now, we have 11 operational offices across Indonesia. We see big prospects in cities outside Java,” Prasetyo said.

Despite the potential in outsourcing, the company acknowledged that intense competition often hampered its business growth, especially competition from big foreign companies such as ISS Indonesia.

ISS, a facility services company founded in Copenhagen, Denmark, provides various services in cleaning, catering, security and facility management, among other areas.

Moreover, new government regulations on workers, such as an increase in the regional minimum wage, has become a challenge for the company to boost its profits.

The government proposed an 8.03 percent increase in the minimum wage at the provincial level for next year. The figure had been calculated based on several variables, such as inflation and GDP expansion, which was in line with Government Regulation (PP) No. 78/2015, the Manpower Ministry said.

Furthermore, for many years, there have been growing public concerns over the concept of outsourcing, which may negatively affect job security.

Responding to this issue, Shield-On Service said it always followed the government’s regulations in running its business.

After the IPO on Tuesday, the company hopes to expand faster and book at least Rp 1 trillion in revenue by the end of 2018, and between Rp 20 to 30 billion in net profit this year.

During the opening session, Shield-On Service shares, listed on the IDX under the code SOSS, jumped by 50 percent to Rp 414 per share. “The IPO’s share price was Rp 275 per share,” the company’s president director, Herman Julianto, said.

With the IPO, 31.65 percent of its shares are now owned by PT Puragraha Dianpertiwi, 26.04 percent by PT Nusantara Suryamukti, 19.23 percent by PT Inlife and 23.08 percent by the public.

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