Institutional investors may get half of PGN’s IPO shares

PT Danareksa Sekuritas, an underwriter for the initial public offering (IPO) of state-owned gas utility company PT Perusahaan Gas Negara (PGN), expects that around 60 local institutional investors like pension and mutual funds will get half of the shares being offered, Bisnis Indonesia newspaper reported on Monday.

These (60) investors have the capacity to invest huge money, Danareksa’s president director Daniel Iskandar said in Jakarta.

He was speaking to journalists prior to the domestic road show of PGN’s IPO at Hotel Mulia in Jakarta last week.

Despite of the road show for the local institutional investors, Danareksa will certainly take care of the retail investors’ interest for PGN’s shares.

The offer to retail investors will always be there,” Daniel said.

But the allotment of 50 percent shares to local institutional investors, according to Daniel, will not be certain.

It may be possible that the foreign investors may get bigger share than the local investors with a composition of 60 percent to foreign and 40 percent to local investors.

“The certainty in allotment of shares will be dependent on the investors’ interest. If foreigners place more orders, it may be possible that the 60 percent of PGN’s IPO shares and 40 percent to local investors,” Daniel added.

Government has decided to sell the 39 percent shares of PGN at a price of between Rp 1,300 and Rp 2,100 each through an IPO. The company is expected to fix the price on December 3.

The IPO is expected to raise between Rp 1.2 trillion and Rp 2 trillion in cash

PGN said in its prospectus that it will sell up to 1.69 billion shares, of which 1.29 billion will be issued in the first stage. The remaining shares will be issued if the first batch is oversubscribed.

PGN has named state-owned PT Danareksa Sekuritas, Credit Suisse First Boston and ABN Amro Asia Securities as joint lead underwriters for the IPO.

The price indication also looks a bit expensive, said Norico Gaman, an analyst at PT BNI Securities in Jakarta.

Part of the proceeds from the PGN IPO also will go toward deficit reduction, while the rest will be used for PGN's business expansion.

The IPO will be opened for subscription from Dec. 8 to Dec 10, and the stock will be listed on the Jakarta and Surabaya stock exchanges on December 15. (*)