Street Hawkers Pave the Way to Indonesia's First E-Commerce IPO
(Bloomberg) -- The first Indonesian e-commerce startup to go public will test investors’ appetite for technology companies that hail from Southeast Asia’s largest economy.
PT Kioson Komersial Indonesia, which connects some 19,000 merchants in 300 cities with consumers, lists October 3 after raising 45 billion rupiah ($3.4 million). While small, its initial public offering provides a gauge of confidence in the archipelago’s burgeoning startup industry, now dominated by private firms backed by the country’s richest families.
Kioson acts as a sort of middle-man that helps mom-and-pop stores and roadside kiosks, known as warung, sell everything from mobile phone credit to airline tickets. It hands out tablets loaded with its shopping app to merchants, who become the physical storefronts for digital sellers featured on Kioson’s site, such as Tokopedia. Buyers browse in person and place orders before handing cash over to the vendors, who then acquire the desired items through Kioson’s app, pocketing a small fee.
It’s a model that works for a country with an unbanked population of more than 160 million -- over half the total -- and where internet penetration remains low. Bargain-hunters get to browse online catalogs, while Tokopedia and other e-commerce operators reach more consumers than they otherwise would.
“The market and the regulator will be watching us closely. We’re the test subject in a way,” President Director Jasin Halim said in an interview at his office in Jakarta. “We see ourselves as a bridge between e-commerce and the many people still barred from it because of difficulties in using cash for online purchases.”
Unlike more mature markets such as China that have produced tech billionaires, Indonesian exits have come mainly through mergers and acquisitions.
A successful debut could offer a boost to a nationwide effort spearheaded by President Joko Widodo, who’s ordered ministers to ease restrictions on startups and called for more investment in technology to achieve his target of a $150 billion digital economy by 2025. Among the initiatives in the works: the country’s stock exchange plans to set up a market, tentatively dubbed the technology board, to help founders and investors take companies public, Communications and Information Technology Minister Rudiantara said last year.
“It comes down to implementation, because the market is definitely there,” Jeffrey Jap, an analyst at PT Trimegah Sekuritas, said by phone from Jakarta. “While e-commerce is booming in the large cities, most of Indonesia still relies on traditional markets, so there’s potential in bringing them into the fold.”
Kioson is offering investors a 23 percent stake, with PT Sinarmas Sekuritas as the sole arranger. About 76 percent of the proceeds will be used to buy 99 percent of PT Narindo Solusi Komunikasi, a profitable payments company. That means Kioson will book net income in 2018. Sales are set to reach 2 trillion rupiah next year, from 400 billion rupiah from January to April of 2017, Halim said.
“The local market isn’t ready yet to buy into negative value, and that is why we will acquire a profit-making company that will also leverage our product offerings,” he said.