The Jakarta Post
More small and medium enterprises (SMEs) and state-owned enterprises (SOEs) are projected to go public until 2022 in response to tax cuts and a relaxation of administrative requirements, Deloitte Indonesia has said.
The Financial Services Authority (OJK) issued several regulations in 2017 that changed stock listing requirements for small businesses, making it easier for them to go public, Deloitte Indonesia disruptive events advisory leader Joe Lai said during a virtual briefing on Thursday.
In addition, many SOE subsidiaries plan to float their shares on the market within the next year or two.
“In terms of funds raised, it can’t be projected now but expect big ones coming up if any SOE [subsidiary] go listed,” he said.
The Indonesia Stock Exchange (IDX) has recorded a total of US$325 million raised from 46 IPOs this year as of November, with offerings dominated by small and medium-sized companies. The figure was 59 percent smaller than that of the same period the year before.
Read also: Indonesian bourse sees fewer IPOs this year
Several SOEs announced plans last year to take their subsidiaries public, including publicly listed construction companies PT Wijaya Karya (Wika) and PT Adhi Karya. However, the plans remain on hold indefinitely as a result of the COVID-19 pandemic.
Publicly listed toll road operator PT Jasa Marga announced on Wednesday that it was planning to take its subsidiary, property developer PT Jasa Marga Related Business (JMRB), public in the next few years, according to a filing with the IDX.
JMRB, the filing stated, was in the early study and preparation phases for the IPO.
Joe also expected that Indonesia’s IPO market would remain robust next year despite the continuing impact of the pandemic.
The government’s strong push for SOEs to go public and the fiscal stimulus to support the nation’s economic recovery would keep the IPO outlook positive in 2021, Lai said.
The government is injecting about $50 billion through the national economic recovery program, which is expected to generate a significant multiplier effect, said Lai.
“Further corporate tax reductions for listed companies are also expected to create a favorable impact on the IPO market next year,” he said.
The government has lowered the corporate tax rate to 22 percent this year from the previous 25 percent and will lower it to 20 percent in 2021. Listed companies with at least 40 percent of their total shares on the market can also enjoy an additional 3 percent reduction.
Big companies, however, still appear reluctant to seek funding on the stock market over fears that their value could not be absorbed by the local market.
To tackle this issue, Lai suggested that the country deepen its capital markets to absorb large IPOs.
“Once we have a deep capital market, big companies will no longer need to conduct dual listings and the IPOs can be fully absorbed by the domestic market,” he said.
Indonesia recorded more IPOs this year than any other stock exchange in Southeast Asia, its third consecutive year holding the title, according to Deloitte.
Twenty more companies are in the bourse’s IPO pipeline, IDX assessment director I Gede Nyoman Yetna said on Nov. 19.
The dramatic increase in retail investors throughout Southeast Asia will be a good opportunity for companies to go public, Deloitte Southeast Asia and Singapore disruptive events advisory leader Hwee Ling Tay said.
“Given the amount of money floating in the market, an IPO could be an opportunity for companies that are looking for additional funds to expand their businesses,” she said.
Editor's note: This article carried the wrong heading. It should have read “More SMEs, SOE subsidiaries to go public until 2022: Deloitte”, as Deloitte Indonesia’s Joe Lai projected that at least a dozen SOE subsidiaries would go public within the next year or two. We would also like to clearly state Lai’s statement that the government is injecting about US$50 billion through the economic recovery program, which is expected to generate a significant multiplier effect.