With e-commerce unicorn Bukalapak set to list on the Indonesia Stock Exchange (IDX) in what is likely to be the bourse’s biggest offering since Adaro Energy’s issue in 2008, there are high expectations of the path the listing will blaze.
IDX is seeking to tap the growing interest in the tech sector, especially homegrown brands that are looking to debut in the local public market.
Listings such as those of Bukalapak and GoTo could also boost Indonesia’s IPO market. The archipelago has seen the highest number of IPOs in Southeast Asia since 2018 with 51 companies listing on the bourse in 2020. However, the total amount raised, at $421 million, was much smaller compared with the neighbouring markets of Malaysia, Singapore, and Thailand.
Talking to DealStreetAsia, IDX commissioner and Indies Capital co-managing partner Pandu Patria Sjahrir said guidelines related to dual-class share regulation with multiple voting rights to accommodate more tech listings were underway. Indies Capital has invested in IPO-bound Bukalapak through two vehicles, Komodo Indigo Investment Ltd, and Komodo Opportunity Venture 1 Ltd.
The policy change is aimed at attracting more local tech companies to list in the domestic market instead of pursuing IPOs abroad, in venues such as the US where listed companies can issue dual-class shares.
The move might not guarantee a rush of tech listings though; in Singapore, where the stock exchange in June 2018 allowed firms to list dual-class shares, the response has been muted.
A dual-class share structure enables a company to issue two or more classes of shares that have different voting rights, dividend payments, and other features. Under this structure, founders enjoy super-voting rights that allow them complete freedom and flexibility to steer the enterprise while being a public-listed entity.
Sjahrir – who is also a seasoned investor and board member at several of the region’s tech giants – will try to bridge the gap between IPO hopefuls from the country’s tech startup ecosystem and the IDX.
Sjahrir also serves as the chairman of SEA Group Indonesia, the board member of Gojek, and the director of Toba Bara, a listed energy enterprise in Indonesia. He is the managing partner of Indies Capital, an Indonesia-focused alternative asset manager. The firm has invested over $700 million in the past seven years. Indies has a strategic alliance with AC Ventures, an ASEAN-focused seed and early-stage fund. Indies Capital and AC Ventures have invested in over 100 companies.
Edited excerpts of the interview:-
Could you take us through some of the policy changes – dual-class shares with multiple voting rights (MVR) and SPAC regulations – the IDX is planning to roll out to attract more tech listings?
The [guidelines related to] multiple voting shares are likely to come out in one or two weeks, it is pending OJK [Indonesia’s Financial Services Authority] approval. We have received insights, inputs and ideas from all stakeholders from across the industry. Hopefully, the regulation should pave the way for more technology companies that want to have dual shares to consider listing on IDX. So far, we’ve already informed companies about how we are going to implement it because there will be a specific code for companies that have multiple voting rights.
Besides MVR, there will be some revisions to the IDX Listing Rule I-A pertaining to requirements for being listed on the Main Board. The proposed changes are already in the Rule Making Rule (RMR) stage.
For instance, a company listed on the Main Board is required to have profits for the last financial year and up to Rp100 billion in net tangible assets. The proposed revision will ease some of those requirements.
In your view, why did Bukalapak decide to go ahead before the MVR rule took effect?
Bukalapak has a slightly different story as the founders are no longer active in the business. The management is run by professionals. The shareholders decided to push forward [with the issue]. And, it has turned out to be a good thing for them as the timing is perfect.
In India, Zomato became the first Indian tech IPO company of this generation to witness unprecedented demand and a stellar debut. Do you think Bukalapak will have a similar IPO journey?
Bukalapak is the first major e-commerce or technology-related company to IPO soon. We have seen some tech stocks, including digital banks, with good fundamentals, but much smaller in size. Investors have seen technology as a major contributor to the Indonesian economy and they want to participate and be able to reflect that in the stock market.
However, there is a huge mismatch between demand and supply. The demand is very high and not enough supply. You can see that the IDX technology index outperforms any other index.
JCI Index's tech exposures is still underrepresented but has been growing over the past months
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When I became the IDX Commissioner last year, I mentioned that we have to go elephant hunting to whet the huge demand in the public market. How to bring forth supply every quarter or every six months?
We are seeing strong demand for this type of asset class, not only for Bukalapak but for other tech companies too.
What is your assessment of the next batch of tech listings following Bukalapak’s debut?
I would say a couple of companies valued between $500 million and $2 billion are strongly considering [a local market listing].
The geopolitical situation has also driven big fund managers to look at Southeast Asia [as a potential listing venue] after considering what happened to some IPOs of Chinese tech companies recently.
If you look at the top traded stocks today [on IDX], they are mostly from tech-related sectors. These stocks are clocking daily volumes of $10-30 million. In the Indonesian context, that’s relatively reaching scale as companies here do not fundraise as much as e-commerce does. So, you don’t have much of a fundraising story.
Given the strong demand for the Bukalapak offering, do you think some IPO aspirants may actually forgo the idea of listing overseas and seriously consider the local market for a public market debut?
It depends on what the company is looking for. What’s the purpose of getting listed in the US? If one is only thinking of maximising valuation in the short term, then IDX can be strongly considered. Since I have been involved in local and US listings, I would say both options have pros and cons.
I always tell founders that if you are in a heavily regulated business, then you should first list in your own countries, and subsequently go overseas. You need it for engagement with the market.
Stakeholder engagement has [increasingly] become more significant. While technology does play a role in making things efficient and offers customers better value, the regulatory aspects always come into play. Your business depends on where you operate and what society at that place is thinking about.
So, if you want to maximize profit in the long run, you have to maximise stakeholder engagement.