11 September 2008
RI May Delay Krakatau IPO Due to Market Turbulence

PT Krakatau Steel, Indonesias biggest state-controlled steelmaker, may delay its initial public offering until next year from November because of a slide in the stock market, the government said.

The government, which had expected to sell 35 percent of Cilegon, Banten province-based Krakatau by November, may delay the sale or just offer a 10 percent or 15 percent stake this year, State Enterprises Minister Sofyan Djalil said late Wednesday in Jakarta.

"We are waiting for prices in the stock market to bounce back to justify an IPO," the minister said in an interview at a government function to celebrate the Presidents birthday."If we cant do it this year, well do it next year."

The benchmark Jakarta Composite Index, which rose more than sixfold in the five years through 2007, has lost 30 percent in 2008 after a decline in commodity prices and on concern global credit-market losses will prompt investors to sell emerging market assets. Krakatau President Director Fazwar Bujang said on July 16 the company may raise as much as Rp 5 trillion (US$536 million) by selling up to 40 percent of the company.

Krakatau plans to build new plants to double steelmaking capacity to 5 million metric tons of so-called steel flats and coils by 2012, Bujang said in July.

The parliament has approved "in principle" the sale of as much as 30 percent of Krakatau Steel through an initial share sale, Totok Daryanto, a member of a parliamentary committee on the sale of state assets, said Wednesday.  "The process Still has a long way to go," Daryanto said. The committee needs to gain formal approval from the government and the House of Representatives chairman, he said, without giving a timeframe.

The government may also delay the sale tif stakes in three plantation companies because recent declines in prices of crude palm oil and rubber may damp investors appetite and the government hasnt secured approvals from the parliament for the stake sales, Djalil said.

The government plans to sell as much as 40 percent in PT Perkebunan Nusantara in, PT Perkebunan Nusantara FV and PT Perkebunan Nusantara VII, Bisnis Indonesia newspaper reported on July 14, citing Achmad Manggabarani, a director general at the Agriculture Ministry.

Sofyan also said state-controlled companies should buy back shares tp take advantage of falling stock prices. "If state companies can buy back, we encourage them to buy bade their shares," he said.

Buybacks may arrest the decline in the countrys benchmark stock index. The Jakarta Composite Index has fallen 19 percent this quarter after commodity prices dropped and on concern that global credit-market losses will widen, prompting investors to sell assets in emerging markets. Four of Indonesias 10 biggest companies by value are government-controlled.

(Source: The Jakarta Post)

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