Garuda's IPO to be Evaluated

BOGOR, KOMPAS.com - The government will evaluate the results of PT Garuda Indonesia Tbk.’s initial public offering following the drop in the company’ share price during listing, Hatta Rajasa said.

"I have just talked with the finance minister (Agus Martowardojo). We will evaluate the results of the IPO," the coordinating minister for economic affairs said when met at a state enterprises’ leaders’ gathering at Bogor Palace here on Friday.

He said he had hoped that the price on the first day of trading would be higher than that of the IPO price set at Rp750 per share but now it would be the market that would decide.

"Let the capital market mechanism work. Of course we hope it could be higher than that. I hope it will increase later," he said.

The Garuda shares were closed down 6.66 percent or at Rp700 on the first day of trading. Regarding the plan to sell other state enterprises’ shares Hatta said the process would be tightened especially with regard to transparency and accountability.

"One must not think negatively that the process of IPO or right issues would be made more difficult. It is not like that. We need state enterprises to enter the capital market to strengthen their capital structure as well as to promote transparency and accountability," he said.

He said transparancy and accountability were important factors for stock offering to prevent bubbles.

"Usually the yield will increase after they have entered the capital market because they are forced to be transparent and accountable. Of course our capital market will be stronger (with them) so that it would not easily suffer a bubble," he said.

PT Garuda Indonesia Tbk.’s management thought the drop in the price of the company’s shares on the first day of trading was merely due to market mechanism.

"That is a common market mechanism that happens when supply is abundant and demand is minumum," the company’s finance director, Elisa Lumbantoruan said to newsmen after the signing of an agreement for the procurement of four Boeing 737-800NGs with RBS Capital Aviation.