Indonesia ripe for PE exits

While China and India fund managers struggle with exits, Indonesia offers a comparatively attractive exit environment, according to Northstar.

Large-cap private equity firms in Indonesia are facing an abundance of exit options as the country’s stock market improves and foreign trade buyers continue to hunt for assets, according to Ashish Shastry, managing partner at Indonesian private equity firm Northstar Pacific Capital. 

“We think the exit environment is improving substantially,” Shastry told Private Equity International. “If you look at the IPO environment, there is a lot more interest from foreign investors to buy Indonesian stocks. There are also pockets of wealthy Indonesian investors and substantial institutions and funds that are supporting these IPOs – I’d say that is the big difference from ten years ago, that you have these real pockets [of investors] that will support good size IPOs in Indonesia.”

Northstar has exited several of its portfolio companies via IPO in Indonesia and is bullish about the listing prospects for its recent investments such as Triputra Agro Persada, Shastry explained. The firm invested $200 million into the palm oil business alongside the Government of Singapore Investment Corporation in September last year. 

“Strategic exits are also becoming more interesting for private equity. We’ve seen in particular Chinese and Japanese buyers that are interested in owning the right types of assets in Indonesia. Also, if you look at the number of Asian and Middle Eastern sovereign wealth funds that own substantial telecom and financial assets, you’ll see that there is a lot of strategic interest.”

Despite keen interest coming from foreign corporates, IPOs can sometimes offer more attractive valuations for private equity exits, Shastry believes.

In March, CVC Asia Pacific plans to list 40 percent of its 98 percent holding in Indonesia-based Mata Hari department stores on the Jakarta stock exchange, according to media reports. The firm is expected to raise up to $1.5 billion for less than half of its interest in the business, having invested about $790 million in Mata Hari in 2010. 

CVC declined to comment on the sale, but the firm is apparently taking advantage of Indonesia’s improving IPO market. 

CVC’s decision to list only part of the business could signal an intention to take advantage of strategic interest in consumer-based businesses. It was also rumoured that CVC was in talks with Japan's Aeon and Thailand's Central Group over a $3.5 billion sale of 80 percent of the business. 

Shastry did not comment on CVC or its plans, but said in general, consumer retail businesses are strong candidates for either a sale to strategics or an IPO. “It can go either way because you have a situation where strategics are very interested, but obviously Indonesia’s growing middle class and very young demographics make a good IPO story as well.”