good morning I hope you can hear my voice yes morning very warm welcome to today's

webinar and today's episode is on funds from overseas and west so we will be
talking about you know what are the different options what the overseas investors
are looking how the companies need to be in good shape and present themselves well
then how do they need to work to get look healthy you know before you go to the
market asking money and the agenda you know we love little few more things on the
agenda but we'll be talking about all this uh type of uh topics but if you have
something towards the end we will have time for you to ask our two experts who are
going to be here so let me introduce to experts uh our two main speaker of the day
Singapore he had a lot of experience more than 20 years plus in raising funds and
his experience quite a bit in the southeast Asia with just Singapore Indonesia and
Malaysia and India so he has a lot of regional experience very focused he used to
work with the Avenue Capital ilfs new world as Asia Capital these are three
companies highly focused on investing in Indonesia and he's done a lot of projects
successful projects of bringing funds to Indonesia for last 20-22 years and its
fund size have been between 10 million to 100 million but you know depending on the
scope there are variations of that so he will be talking quite a bit of how as a
you know overseas investor what do they look for what are different options how can
you go around doing it from Indonesia okay France was very well known in the
Indonesian circles I have no name as a prospect client of mine he has 27 years of
experience in finance and as Finance director and I've known him as Finance
director of one of the companies I was trying to consult he specializes in you know
accounting Financial Services Audits and etc etc helping companies to get better
the CEO and founder of oti we do management consulting so we brought these two
speakers today so we could you know add value to some of you to see how you can
raise funds because today the situation is that there are only two countries that
IMF service grow above five percent in this year one is India the other is
Indonesia so if we are sitting here and I look around the companies are about to
grow they are the potential to grow but funding is becoming not so easy like old
Asia so that's why we thought there was a need to get some experts to talk about
how you can get funding so a couple of slides for the organizers is an Indonesian
company uh 23 years in the business and very lot of international portfolio
generally you have companies coming from overseas and doing work here we are very
few Indonesian companies who actually go across the globe and work in different
parts of the world number of things which are on the screen so I won't elaborate
too much on it now interestingly we do when where the top management can see the
result of their actions they can see progress how come how much strategy we are
succeeding and all this is automated wired so the management can get the same
information in the meeting room as well yes and Company is known as a finance
director in Indonesia and there's a timeline on the screen it talks about uh you
know his journey as a finance director he does a lot of workshops a lot of
Consulting and a very well known in society he also started a CEOs club and CFOs
Club in Indonesia and I'm a member of one of them so I've known him from that for
last 15 20 years yeah and services typically improve what you see on the screen
accounting tax audits compliance business planning Financial structure Erp so on so
forth yeah and he has a good understanding of the finance in Indonesian companies
this is a deep in sector it's quite impressive names here on the screen maybe you
can recognize three of them and his Consulting is growing now let's move on to a
speaker from Singapore Aero strategies foreign basically they focus on South and
Southeast Asia they were last team of Partners independent and mostly they're very
result system which I was mentioning about the Indonesia Singapore Malaysia and
India so you can see they have a very strong Focus and they specialize in these
industry verticals from manufacturing real estate hospitality Telecom Financial
Services retail fintech Healthcare oil and gas and Renewables and of course when
something comes along I'm sure they look at those things also there's quite a bit
to talk about the minimum this is the capital raising spectrum and uh gaurav will
be talking about options of these kind of things and the process that you can see
later in the presentation how these are different options different type of
investors they work with who will bring the money and they facilitate the whole
process and they worked in multiple projects I just put a couple of these projects
and then buddhi will be talking about the challenges of raising funds I will not be
too much on you okay I will just put it on screen now so you can see there's a lot
of Indonesia Malaysia especially Indonesian experiences so gaurav and this team do
understand Indonesia I mean there's a point I am trying to make this morning and so
you know out here let's move on to forward and uh buddhi talk about the funding
situation in Indonesia served to you okay thank you naresh good morning see you and
business owners okay so I have uh already explained already have uh 30 years of uh
working experience as a finance uh Financial controller Finance directors and I
have a once one good experience when I was CFO for up got me candy I think most of
you know that product right so the product in the year 2011 was uh 2010 and 2011.
I'm helping them to get funding for uh from Bia bang uh bii uh about 15 million US
dollar for the factory expansion and also 5 million dollar for working capital yeah
so uh my experience is that when we are trying to do the funding uh most banks
would require us to present like our company profile our vision mission uh company
goals and values and the product portofellio and our strategy so basically we
should have like the past five years uh historical financial data uh showing the p
l and also the the balance it and also we should have like a one-year business plan
and if if possible you also provide the five-year strategic plan so like where you
be want to be in the next five years and what it will do in the one year how it
goes with this production capacity how uh what is that strategy for the export for
domestic so we should be very transparent and very clear about the historical data
and also the future the future plan so so make it's like uh if you are a beautiful
girl you're trying to dress up and make yourself like as beautiful as possible so
basically uh getting funding is something like that you should be very clear about
your company profile your history and your future yeah so that that makes the like
we present within three hours and then directly it get get get approved because uh
we make it very clear about what up is and what uh what the the plan for the future
is so basically getting funding is like that how you make yourself transparent and
clear and uh how to make it attractive that why you need the funding for the for
the expansion and for the working capital so so make it very smooth Yeah so
basically uh uh Indonesia has has low indicator of financial inclusion like at the
level of 40 like only 100 million uh people of uh Indonesia out of the 270 5
million people have bank accounts and only 15 million people have credit cards and
also limited access to finance for medium small small medium Enterprises yeah and
and also in adequate Financial supervision and also consumer protection and
financial literacy in which is relatively quite low compared to uh Singapore
Malaysia Hong Kong and so on so basically this is the condition and at the moment
the corporate Indonesian rupiah loan rate is at a level of 9 to 11 depending on how
good your company performance and brand reputation and if you have a USD loan rate
is between five to six percent so right now I'm uh assisting one one one big
companies factories in samarang um yeah so managing uh quite quite a big uh big
size of the the the the loan amount and so on so basically uh this is the level of
interest rate for uh and also of course the bank will will look at your ebidaya
like your interest rate uh your your payment should be your 8B that should be at
least three times more than your your installment or your payment for record alone
and most loans should have collateral in the form of fixed asset uh for the factory
expansion and also in the form of account receivable and inventory of course they
would they they would like to know your uh cash conversion cycle they would like to
know your how many days of your uh receivables how many days of your inventory
minus your payable days when the the working capital is like 60 days or 30 days you
know so from there they they know how much money you need to fund your operation
and then most Bank also require good bookkeeping and management reporting of the
past three years and also Financial projections for for one year or three years
ahead so basically if you have a good bookkeeping and management reporting for the
historical and future that that that will make the funding process pass faster yeah
of course if you have the audited report that would be a mass or for a bank uh to
be confident in your your financial numbers so basically um funding is easy easy
difficult like it is easy if you are ready and prepared your company has a good
record of bookkeeping and you have a good presentation of your management reporting
you have uh Patcher you can show your uh financial plan so basically that would be
easy and of course they would look at your organization structure they would look
at your uh uh your product photo for you and so on so basically that's
what they can say about the funding uh in Indonesia so hopefully hopefully it's uh
giving insight for you welcome the rest will stop sharing my slides so you can
share your yes she's already she's got the capability to share now okay sounds good
thank you hello everyone uh it's it's nice to have you all here on this uh uh and
it could be like pleasure to meet you all in person as well I come to Jakarta quite
often most likely once every month is what my schedule is for Indonesia I've been
coming to Indonesia for like 17 18 years uh primarily either investing capital in
Indonesia or using capital for uh Indonesian companies from various channels the
background on myself and then we head into the presentation so I used to work for a
very large private Equity Fund in Singapore Avenue Capital group which had about 20
billion dollars in those days and we had a book of about four trillion dollars to
invest in Asia so Indonesia was a very big market for us to be invested by the bit
of capital in Indonesia during those days with a lot of companies like mayabada
group uh uh the quite a few such big groups with which uh we invested our Capital
uh the experience was quite good I mean like uh in spite of the names which are
involved where people tend to have a little bit of a negative outlook uh we were
able to recover our positions along with the returns uh agreed between investors
and the investing companies uh likewise uh I I have been involved with quite a bit
of fundraising in Indonesia across various types of Industries and situations over
the last few years there is quite a bit of excess in terms of the investors who are
interested to invest in Indonesia now the advantage that we bring to the table
because we have been part of the investor group ourselves we exactly know what the
investors look for when they are looking to invest in Indonesian situations and
that's our unique uh propositioning in terms of uh uh we are able to preempt a lot
of these requirements for uh the risks which the investors are likely to see and
make their decisions so we help our clients to prepare better for such queries
questions or situations that investors are likely to look at it in a certain way uh
which which helps us to achieve better outcomes more positive outcomes as compared
to some of the other similar Boutique advisory firms which operate in the market uh
now uh just to I mean set the tone uh this particular presentation is more geared
towards the non-banking side of things I mean because as pabudi mentioned he is an
expert in raising capital from the Indonesian Banks and most of you have
relationships with the banks in Indonesia so my assumption is that uh you will need
very little help when it comes to raising money from the Indonesian Banks
themselves I mean right so uh in the interest of time what we thought that uh you
will have more interest to understand the options that are available overseas from
Singapore or Hong Kong or some of the other markets in Asia which are investing
capital in uh Indonesia so just just keep that in mind uh when you look at some of
these numbers or some of these strategies that we will be sharing with you because
the first reaction is always to compare it with the bank but this presentation is
more towards non-banking side of things okay Anisha can we go to the first slide
here yeah so uh see typically what we believe I mean like uh most of the companies
which look for Capital I mean uh in Indonesia are typically because they want to
expand their businesses grow their businesses uh they they want to kind of like uh
uh you know set up factories or I mean because they see more demand because of the
demographics it's a favorable demographics that Indonesia has with a 275 million
population young population so demand is continuously increasing and there is need
to increase the capacities in the industries uh the demand is rising so a lot of
businesses are very well positioned to invest and grow their businesses for which
they need Capital now when the businesses are small or mid-sized businesses a lot
of them are able to go to the banks and secure the financing unfortunately I mean
in Indonesia most of these Banks uh I mean for last seven eight years have insisted
on fixed assets as collateral before providing any uh financing uh I mean not their
fault it is just that because of all the npls and defaults that they had uh they
felt it was more safe to have collaterals and securities uh for any loan uh instead
of taking some unsecured or more open positions so which uh this particular change
in the behavior of the Indonesian Banks has resulted in basically a constraint of
capital for growing businesses right because uh not all businesses will have
collateral sufficient collaterals to keep borrowing from Banks infinitely there is
a limitation in terms of topics assets that the businesses have which can be given
to the banks or Capital raising so this is one one I mean like thing that we come
across very regularly when Com when companies or businesses they speak to us for
their Capital raising uh one prime reason is rising demand or growth Capital
basically is what they seek uh obviously I mean a lot of businesses in last three
four years uh have been negatively impacted because of the bad business environment
I mean the demand the destruction happened because of kovid generally most of the
businesses slow down now last one one and a half years uh the interest rates have
been increasing the commodity prices have gone up because of the Russia Ukraine war
so this has again impacted the businesses in a negative way uh I mean the margins
have suffered the profitabilities have gone down and and to top it uh the working
capital requirements have increased because of uh the uh IR but higher commodity
prices which has again uh been counterproductive for most businesses because uh a
margins are uh I mean getting squeezed and then volumes are also coming under
pressure uh because of the constraint in working capital so this is this is
something we see very regularly and third I mean like is uh I mean again uh
businesses obviously uh it's all about taking decisions right you you sometimes you
make right decisions sometimes you make wrong decisions but some wrong decisions do
result in I mean certain issues the businesses who uh have issues basically you
know recouping uh because of wrong business decisions I mean I mean Prima facing
what we see is that uh the data analytics is uh there is a limited Reliance on data
and a process based decision making so most businesses like the business owners
they take a little bit of an emotional uh view of things uh it is more based on
field field rather than art facts hard data so most times uh the businesses the
owners are correct they get their uh they they get it spot on but because of other
I mean uh reasons like bad business environment or kovid or some other things which
are not uh I mean uh factored into you know uh their own analysis uh they end up
making slightly uh wrong uh decisions I mean like which impacts the business I mean
so that is one the second is a lot of times the business owners are tempted uh to
move the business funds for personal use like if they want to buy some property or
they want to buy some car or some other they want to make some investment uh they
sometimes pull out the funds from the businesses for personal use which again
impacts the business negatively uh this is one this one specific point is quite
classic I mean we have seen a lot of businesses diverting their working capital for
kpx or for Investments or to pay long-term debts so what uh I mean the business
owners don't realize is that while the capex I mean whatever Investments you do
whatever capex uh is done it will take five seven years to you know realize uh I
mean uh the return on such Investments uh but the working capital provides you uh
the return on a day-to-day basis right because the more working capital you have
the more sales more inventories can be sourced or sales can happen and that is
basically the key driver of increasing the profits increasing the revenues so the
moment working capital has been moved for uh Apex uh or Investments or compare to
repay long-term debts it basically I mean uh reduces the amount of working capital
which the businesses have and that then impacts the profitability and everything
else so this is what we have seen in Indonesia typically like uh where the
opportunities are and what mistakes uh or where I mean the businesses suffer from
what what's uh makes it uh you know brings difficult times for the Indonesian
business owners so this is I mean the uh primary reasons okay now uh as far as
capital uh structure is concerned I mean like any company any uh I mean uh business
relies on a few different types of Capital One is obviously loans debt I mean like
uh which which is a primary driver of the growth or a lot of businesses uh along
with Equity whatever Equity the promoters inject that becomes a very very important
source of capital at least in the initial days uh to grow the business now that is
again I mean uh can be raised in uh different ways I mean like you can get project
Finance for your Greenfield projects there are term loans working Capital Loans OD
facilities I mean and the sources of such uh I mean loans typically come from Banks
either in Indonesia or in International Banks in Singapore Hong Kong then once I'm
in the uh businesses they have exhausted the banks basically the ability to Source
Capital from Banks a lot of times multi-finance companies are approached I mean
like which can provide leasing higher purchase aspective loan uh structures
basically or factoring invoice financing kind of structures although they are a
little more expensive as compared to the banks but uh they are more flexible as
compared to the banks so a lot
of local companies local businesses they they uh the second uh uh the second the
second line of uh funding options typically I mean lies with the multi-finance
companies like say astha Credit Company or adira Finance to companies like those
which are used by the businesses to enhance uh uh capital in their businesses now
the third option is basically which is normally not accessible which which are
mezzanine loans special situation Finance structured credits uh non-performing
loans resolution uh this is a product which is typically not accessible uh for uh
accessible in Indonesia to a lot of business owners because most of the investors
who are actively doing this kind of product they are mostly based in Singapore Hong
Kong uh Dubai I mean like very few of them actually operate out of Indonesia so
there are few but uh bulk of the uh I mean such Capital providers are based in uh
in offshore markets right and these guys can do large I mean like deal sizes they
can easily write a check of 25 30 million dollars uh depending on whom we speak to
they can go up to like 150 200 250 million dollars in a single transaction so they
are a lot more flexible sometimes they can do deals without a patient fixed asset
as a collateral they can take land as collateral they can take uh shares of your
company as full lateral they can do certain structures like assignments of proceeds
which are expected to come from certain say sale of assets uh in say six months of
time so they can do a lot of uh Innovative structuring to provide Solutions so this
is this is one of the focus areas for Arrow strategies I mean we help our clients
quite a bit to raise such loans from these hedge funds special situation funds or
multi-finance companies uh to solve the immediate issues of the businesses in
Indonesia yeah now sometimes I mean uh the owners are now the advantage I mean like
just to go back a little bit the advantage of taking Amazon in loan it works like
equity but the owners do not have to dilute the equity because the owners can
continue to keep uh keep all the shares with themselves they just provide a certain
return which is accepted between the borrower and the lender and and they can keep
servicing the return and keep the equity I mean like with themselves now in certain
cases I mean the businesses are growing I mean like uh the businesses are doing
well and the owners are not comfortable taking expensive mezzanine loan so they
prefer to Value shares I mean like and give up some Equity uh to to I mean like you
know the investors uh that's where some of these private Equity Funds uh they come
in they can provide growth capital or if you want to buy another business for which
you need financing acquisition Finance or if you're going to go for iepo and say
next one year or two years and you need certain Bridge financing kind of like
structure to tide over next one or two years before the IPO happens so these
private Equity Funds can come and take your shares in your company which can be
used for different business requirements sometimes uh the the owners themselves can
value their own shares so the money goes to the uh the owners and not to the
company but depends on the situation and the requirements so there are a lot of
privacy funds and family offices in Singapore which are actively acquiring minority
Stakes or majority Stakes basically I mean for the purposes to provide growth
Capital acquisition Finance free IPO Finance to the companies in Indonesia now
obviously uh once you've done your minority you've raised money in form of minority
Equity placement now sometimes I mean uh the businesses are growing at such a rapid
space or they have I mean a certain kind of a problem where a minority placement of
equity does not solve the problem so the business owners are sometimes kind of
either they feel uh it is a good time to exit because maybe they have succession
issues the family members uh the because we see a lot of this where the the
Patriots of the family who started a company 30 years back or two years back 20
years back and the businesses are doing well but the the their kids basically are
not so interested to run the business they want to go more into Tech or start up
space so then they are kind of stuck with businesses without any succession
planning so a lot of owners are then tempted to kind of sell their businesses so
that's where uh there are a lot of private Equity Funds Sovereign wealth funds who
come in and basically I mean buy out such businesses maybe acquire a 70 80 Equity
uh let the owners keep 20 30 percent stake uh I mean so that they can continue
running the business and in the next two three years four years the Takeover
happens where the management comes in appointed by the private Equity Funds or
government funds and the tape of what happens basically over the next three four
years so it's a very staged way of kind of uh selling a business as well as I mean
passing over the control to another uh investor I mean right so there are also
strategic investors I mean like who own similar businesses who are looking for
growth we also work regularly with such investors I mean who want to kind of like
uh grow their businesses in Indonesia they don't have presence in Indonesia so they
come and acquire businesses in Indonesia I mean like they work closely with the uh
owners and they acquire such businesses so that's uh again uh like a a big m a i
mean kind of a strategy that we have now we also come across I mean situations
where uh the business owners have basically developed commercial buildings uh
hotels and resorts Hospitals now sometimes I mean um I mean they are looking to
sell because either there is too much of debt or they just want to exit because of
the results which I mentioned or or they feel the price is too good to refuse right
so we also have investors who can basically acquire Office Buildings hotels and
resorts I mean hospitals uh in in Indonesia uh in most mostly I mean these
investors like to buy in this is like to some extent I mean like these are
typically the hot spots but now there is a little bit of a change in that view
people are open to labuan bajo and some other markets as well I mean if they see
that it's going to be the next big thing then they don't mind coming and investing
in other locations especially for hotels and resorts so we are running quite a few
mandates right now where we are helping owners to find investors for their
properties uh in Indonesia the last I mean like typically I mean the form of
capital basically is Capital Market right I mean where you take your company public
by going for a iepo or a RTO I mean like RTO typically applies for mostly coal or
mining companies where there is quite a bit of requirement on the profitability and
uh I mean some of these parameters if the companies cannot fulfill then they go for
reverse takeovers buy a shell listed vehicle and then reverse post it uh so the
investment Banks or Securities Companies they specialize in these IPOs and rtos uh
process I mean right now mtn's bonds has also been a very popular product in
Indonesia for mid-sized businesses a lot of mpns placements were done with
insurance companies or mutual funds in Indonesia but these mtns the problem was
that the sizes size were quite small I mean typically 10 million 50 million dollars
probably was a maximum size of MP and that would be I mean that the companies could
tap into anything more than 10 15 million has been challenging for most uh
businesses to to race through a MTN program uh now I understand uh like the
insurance companies have gone quite uh slow on this product over the last two or
three years I mean like they were quite aggressive before covet but uh during covet
because of a lot of insurance claims that they had to settle uh they had issues
with their liquidity and uh they are very choosy when it comes to MTN cycle right
so this is broadly the spectrum that we believe most companies or businesses seek
as far as capital uh is required so we basically I mean like uh work with a lot of
Miss sized companies and even some large corporates across various Industries
tourists Capital like uh across these three categories uh it's it's debt private
Equity MN is we are not really active in the capital markets uh space we don't do
that because that we leave it to the Securities firms or investment Banks I mean
like who specialize in that but we do provide some Consulting in that space where
we can help companies to prepare for a IPO or basically I mean like get them ready
for our IPO because uh a lot of times the companies who are going for IPO may not
have necessary experience of going through that uh I mean process so uh we do
handled companies to take them through this whole journey uh which allows for a
seamless uh listing uh from their perspective uh uh as I mean this is a this is a
continuing uh slide to the previous one I mean uh so this is basically a company
like when a business basically takes some form and shape and they start raising
capital for most companies the first capital obviously comes from the equity which
is injected by the founder of the business uh so as the business takes some shape
the next round is obviously equal to the banks local banks who will kind of support
you uh to inject more working capital or expansion Capital basically project
Finance to set up your factories or I mean like uh so so banks are the first uh
door that post businesses log to raise capital for their uh businesses and as I
explained in the previous Slide the second door normally is the multi-finance
companies which use leasing higher purchase or uh asset backed loans basically to
provide extra liquidity where Banks cannot step in the multi-finance companies try
to try to fill that Gap now the second I mean like as I explained on the previous
slide that there is a limitation
to how much money a business can borrow from the banks in Indonesia or multi-
finance companies for a simple reason that uh these are normally based on
collateralities so till such time there is uh there is enough collateral there is
enough security the banks can typically step in but then they also look at a
financial performance they will not want to finance a loss making company I mean
they want positive I mean uh profitable profitable companies the companies which
have a ratio proper debt to debit the ratio proper debt to equity ratio so Mom if
they believe that your as a business you are not sufficiently capitalized your debt
to record equity ratio is same one is to five or one is to six uh they will not
come and finance you because uh the maximum cap or ceiling that most banks will
have that they prefer to have a debt equity ratio of one is to three most times
likewise they will not go beyond one is to five uh dead to happen ratio that they
want ebitda to be not more than five times your uh that debt to be more than five
times your annual even right so that also puts in spite of sometimes in spite of
having sufficient collaterals because of lack of financial performance uh the bank
financing becomes difficult to access I mean like well there is a pep issue I mean
like some businesses have a pep exposure or it is basically nowadays EST is
becoming another big requirements for a lot of International Banks so say you if
you are in a cool business or some other uh say CPO business or some other
businesses which are not seen as uh EST friendly businesses then again in spite of
good performance uh in spite of sufficient collaterals the banks may still not want
to come and participate uh because of all these issues so that's where these
private Equity Funds hedge funds family offices they are normally they have the
flexibility I mean like to go beyond these normally accepted parameters in the
market so for them to come and finance basically a business which has a debt to a
better ratio of like seven times they can come and finance they are not bound by
like any specific guidance that might get to a bit that cannot be like five or six
or seven so if they believe that okay our business is going to grow your habitable
to like uh say uh 25 million dollars in two years currently you are at 10 million
dollars so they don't mind basically giving financing to you because they take a
more forward-looking view this private side of capital private Equity hedge funds
they take a more forward looking view rather than a historic View and that that is
where I mean it helps them to under understand the business better they take that
risk and can provide you capital in spite of some of these challenges like being
having a pep exposure or the business may not be fully ESV friendly or the
currently the company is in loss but has a great project in hand or a great
acquisition I mean that can be done uh so banks will not come and provide financing
in these situations but the hedge funds or private Equity Funds can step in and
provide you the necessary liquidity to fulfill your business requirements now the
various products basically in this like our growth Capital mezzanine loans if you
have a turnaround scenario basically we have the business was not doing well but
now you need a little bit more working capital which can turn around the business
then they will provide you working capital they can buy some assets I mean like
selectively or like if you want to sell some assets so these private this part of
capital uh I mean is normally what we normally suggest are Appliance is that when
uh like uh you exhaust your options to raise money from the bank your next uh round
of capital should come from such specialized institutions uh or private Equity
players or hedge fund players who understand the business very well they can
provide the liquidity without putting too many I mean difficult requirements I mean
they are challenged they do have requirements but they are more flexible so they
try to understand the limitations that the businesses have the owners and they try
to structure a solution keeping in mind the limitations of that business or of that
particular business owner so they like to find Solutions which can work for
everyone I mean like obviously for all the flexibility that they provide for all
the risks that they take their cost of financing is higher but uh if the business
is doing well then it is very well worth you know going for this route are you like
now the third is obviously I mean uh IPO Capital markets right I mean like so once
like uh you've gone through Capital raising from private Equity Funds hedge funds I
mean like then uh uh typical then the businesses should go to public markets or
Capital markets to through IPO RTO or wants basically to raise next round of
capital this is a specialized uh I mean activity which is done by investment Banks
or Securities funds so we are not that involved in this business now the final uh I
mean Capital raising the the spec the life cycle basically involves or yeah the
repo or share financing Solutions so once you've taken your company public uh then
these uh the stocks of the equity shares of the public companies you can raise repo
financing or share financing against the shares now there are obviously some funds
private Equity Funds hedge funds which are doing that business but typically they
are more expensive I mean and along with private Banks so a lot of private banks in
Singapore or Hong Kong so they're aggressively providing repo Finance but they have
their own requirements so I think for today's call this might not be very relevant
but I just wanted to explain how the capital flow Works uh in a in a in a life of
any business or a company now typically when we step in I mean like what I mean the
key factors which any uh company should keep in mind when they decide to raise
capital that uh how much what is the amount of capital I mean like uh you know how
much money actually you need I mean like so it shouldn't be too more it shouldn't
be less it shouldn't be too too like excessive because you want to make sure that
your balance sheets remain in good shape I mean uh you you still maintain uh
healthy cash flows which allows you to service your cash flows I mean because a lot
of times the timing like uh you may have like a very good investment that you will
do today but if the cash flows from such Investments are only going to come after
three years or four years then the business owner has to ensure that either he has
some alternative sources of capital to keep servicing such loans for next three
years or four years or I mean uh he just makes sure that he's only borrowing uh or
raising enough Ash which he is able to service and manage anything more than that
will cause stress on the existing cash flows the working capital will then is
likely to be used to pay off your lenders or investors and that will again starting
start having negative impact on your uh balance sheet so very important to have a
very proper and a detailed evaluation of your Capital needs and your ability to
Service Such capital now the second aspect is uh whether I mean the uh the funding
should be of a long term nature or a short-term nature now if it's more working
capital kind of a scenario where like uh the the call basically right say for coal
I mean uh you are right now the volumes are quite attractive I mean a lot of people
want to buy Indonesian coal and uh the coal prices have gone up they've come down
but because of higher working capital you need more money to I mean sell the same
amount of coal so for such things typically you want to look for more short-term
capital structures which are more efficient which are cheaper as compared to long-
term capital uh requirements plus there is no servicing of any principle when it
comes to short-term capital the long-term capital normally requires a quarterly
amortization or you have to also repay the principal along with the interest the
short term basically does not require uh principal repayment so as far as possible
we should be very clear in terms of the usage of OCS I mean where the money will be
used and accordingly we should decide what is the right structure whether we should
go for more short-term uh structures or we should look for more long-term capital
so if it's a new Factory development then we should obviously be looking for more
long-term type of a capital I mean because it will take two years to build a
factory then make it operational so the capital has to be more long-term to make
sure that the balance sheet remains healthy and comfortable now the third aspect of
any Capital raising is what form of capital they should raise whether you should
come and combine form of equity or whether it should come in form of debt so
obviously most business owners they don't like to value to actually unless it
really becomes important or I mean it is the last resort to raise capital for most
business owners they like to keep the businesses uh with themselves now if the cash
flows kind of like allow for a debt rays and what kind of cost we raise Capital
that evaluation is important that we have to look at your cash flows current cash
flows future cash flows some other cash flows and see whether those cash flows are
enough to Service uh this debt for next two years three years I mean like right
including the projections and you like if the uh cash flows look healthy I mean
like and there is enough buffer to Service uh debt then we would normally advise
you to go for that but if we have a if we feel that there is too much of risk and
it uh kind of certain events May happen may not happen uh then in that scenario uh
we would rather uh prefer Equity kind of a investment because it will de-risk the
business quite a bit like uh if there is no pressure to service
on a quarterly basis and the other side is willing to take Equity risk I mean like
then we should raise Equity Capital because the whole idea is that instead of
keeping 100 percent of of ten dollar Revenue I'd rather want to keep uh 70 of a 30
business because if I have 100 of ten dollars it's only ten dollars but if I have
seventy percent of thirty dollars it is twenty one dollars so the idea should
always be to kind of grow the buy grow the absolute values of the valuation of the
business uh rather than keeping a hundred percent of a smaller business so this
these are the factors which kind of decide what would be the right way of
approaching a particular situation and what kind of capital should be raised so
these are the industry verticals which naresh also mentioned in the slides so we
are quite sector agnostic we we work across sectors uh I mean manufacturing real
estate Hospitality hotels Resorts renewable energy Telecom media technology
financial services including Banks multi-finance companies uh retail consumer oil
and gas Commodities Healthcare ICT and fintech is ictn fintech I mean like for
mature companies we are we are quite Keen but for startups we normally I mean uh
for the startups I mean like uh I mean we are not very we are not like uh uh very
focused on these startups I mean like so our our uh but say if it's a technology
company which has a 10 million 50 million 20 million dollar Revenue then we will
have investors who will be interested to come in and invest into the tech companies
uh but a startup probably we are not the right guys to kind of approach for any
startup situations now here I would also like to I mean um uh say that there are
some challenges which which the market is facing when it comes to whole whole
industry uh CPO because of rspo requirements oil and gas needs massive Investments
so and and also infrastructure I mean right because infrastructure is again uh it's
a balance sheet play so we are a little selective we are I'm not saying here that
we don't do these industries but we are very selective when it comes to the coal
businesses which need funding or oil and gas businesses that require funding the
CPO plantations or because of so we evaluated a little uh slightly closer mostly
because there is limited appetite for private Capital to go into these uh four or
five Industries I mean so the criteria evaluation criteria is a little more
stringent as compared to some of the other industries that I have mentioned here
initial next one yeah so now we go to the types of uh capital I mean like on a very
broad broad basis I mean like what that Capital means and what typically I mean uh
it it uh involves now there are obviously some bridging loans where you need a very
short-term financing for two months three months six months I mean to make a very
specific purpose and then replace it with more uh long term or a short-term
financing I mean like say uh we see a lot of banks in Singapore asking for like
fixed deposits I mean like they want to give you a working capital facility of say
three million dollars uh they might ask you to put a fixed deposit or one million
dollars as a collateral because they may not have the the company may not have
Pixar set of three million dollars so they might say okay I need uh I need to like
you have to provide me a fixed deposit of one million dollars and against which
which I will give you a three million dollar uh OD facility or basically a term
lore or whatever so normally then you have to come in and like you may need some
rich financing to put this empty with a bank because once the empty is given then
the line the term Zone becomes activated and then you can take that Term Loan and
pay back your Bridge Financial so there are situations like these where I mean we
need some rich financing or say you did some acquisition of a company and you have
to basically you have an investor who will come in and buy out buy you out or
invest in your company but he will only come after six months or 12 months and you
need to settle the acquisition or the sale value of a business then we can bring in
some Bridge Capital basically to you know provide the interim financing and so that
as and when the investor comes you can replace your short complete investor with a
long-term investor now the only problem with British financing is is typically it
tends to be quite expensive UI so depending on how what kind of risk is involved
the bridge financing can be as expensive as two to three percent per month uh the
second option I mean the type of capital is typically a short-term capital which
generally means uh mostly used as a working capital capital for uh you know which
is a working capital kind of structure which can be in form of term loans or what
are facilities trade credits invoice financing PR facilities I mean like the
various I mean guarantees Bank guarantees bonds I mean like uh different I mean
because the working capital itself is like the whole gamut of things so short-term
capital is typically a one to two year Capital which keeps I mean uh which keeps
getting renewed on a revolving basis now here I mean uh typically when it comes to
I mean Banks which do these deals I mean as babudi also mentioned the pricing is
typically between nine to eleven percent in IDR now multi-finance companies are
likely to kind of like price the similar uh I mean risk between 14 to 25 so if I
was to go to ask the credit company or or adira I mean they will probably price it
between 14 to 25 percent or Bri multi-finance I mean like so depending on the risk
I mean 25 is more of a on a higher side but between 14 to 20 will be a more
realistic uh I mean uh figure but sometimes some lenders can look for ETC
especially if you go to traffic Europe or glencore or some of these commodity
trading companies their cost of financing seems to be a little higher as compared
to a traditional multi-finance companies now the third source of this Capital comes
from hedge fund State Finance funds uh where they can do some Innovative
structuring and provide you these uh I mean facilities but they charge in dollars
uh their pricing is typically between 10 to 18 per annum in dollars typically
sometimes it can be lower sometimes it can be higher but on a broad range I mean
like depending on the situation the counterparty risk uh like involved the pricing
is somewhere between 10 to 18 percent now the third type of capital I mean is
typically a long-term capital which can be raised for three to seven years this is
typically I mean like in form of project Finance uh term loans mezzanine loans
convertible debentures Equity structured loan structured credit I mean like now
depending on the situation I mean this Capital can come from Banks multi-finance
companies hedge funds special situation funds private Equity Funds I mean and
typically the usages for expansion I mean like it's the expansion capex or you want
to optimize your balance sheet reduce the cost of capital or I mean uh D leverage I
mean the balance sheet so you want to optimize your capital structure you want to
rationalize it I mean like uh that's where I mean like and if you have to make some
Investments or you want to acquire some businesses uh that's typically where the
long-term capital normally gets deployed for I mean and the pricing is I mean uh
like if it's a bank kind of if a bank is a provider then you look at a uh 10 11 10
of 10 9 to 11 kind of a pricing a multi-finance companies would be in that same
Range 14 to 25. hedge funds typically look for 12 to 18 return in US Dollars terms
and private Equity is typically where it's more Equity kind of structure the return
expectations are in range of 18 to 25 per annum in US dollars okay now these are
mostly all capital private Capital providers and we will just give you a little bit
of a sense of like uh what is what these State Finance funds are right so these
trade Finance funds like are little more flexible as compared to the banks they can
they can do more uh flexible structuring they are more flexible about their
products they provide you a lot more flexibility they can structure these deals for
one to two years they more or less provide the similar products like what the banks
will provide and it is typically for working capital the pricing as I mentioned is
up between 10 to 18 in US Dollars and it's a revolver mechanism just like bank so
you don't have to service any principle on a going basis you just keep paying the
interest on uh on whatever the frequency we have decided month one monthly basis or
a bi-monthly basis we just pay the interest typically no hard collateral required
Securities in form of invoices or in terms of in form of POS or whatever and there
is no management participation uh from such investors in the company now thus the
second type of investor I mean is more hedge fund I mean like hedge funds typically
are more long term I mean like they provide two to five years uh tenures uh the
products that they can do is measuring loans convertible debentures warrants
typically used for growth Capital refinancing your bank loans uh position Finance
so we see a lot of this I mean in Indonesia where uh the the the companies which
have taken bank loans have basically struggled because of cash flow issues in covet
to repay those bank loans which has resulted in their calling status becoming I
mean they are not no longer calling State having a calling status of one so they
might be having a call status of two or three or four or five so the moment you
have a calling status of if you don't have a calling status as one then the banks
will typically not come and finance provide you any new capital so we have to
basically first repay the bank clean up that uh clean up those uh outstanding
obligations with the banks uh so that the calling status eventually within uh 12 to
18
months can become one and you become eligible for Bank financing but before that
we have to clean up I mean like so these hedge funds can come and provide you the
capital for paying back your bank loans refinancing bank loans payback those bank
loans so that your calling status reverse back to one in uh one to two years and
that's when basically you can go back to the bank and refinance some of these hedge
fund loans now obviously uh more expensive I mean like uh the irr status funds look
for are in range of 12 to 18 ten dollars now the good news is that they don't
really expect you to service any principle I mean like the principal amount can be
paid at maturity right so no no no uh not a big drag on the cash flows if the
business is not doing very well they will also give you uh extra capital for
working capital because normally the businesses which are having issues uh
servicing the loan have working capital issues because the working capital got
utilized for something else or they were the receivables did not get paid or
inventory become became bad or whatever so the working as soon as the working
capital gets wiped out for whatever reason then the businesses have a lower
profitability lower cash flows which impacts your bank servicing so these guys
understand that uh that that issue that the business has and they will also provide
you additional working capital along with the refinancing whatever the obligations
you have towards the bank so with the new working capital you can you know reignite
the business I mean like in a way which positively helps to have a higher the
higher cash flows in the business which I mean I like can be used for the interest
servicing as well as I mean it makes you healthy to go back to a bank in couple of
years uh to refinance the loan or basically I mean do a minority Equity placement
with a private Equity investor or with some other investor now the interest also we
don't have to pay service in full so when they say 12 to 18 irr does not mean that
you have to pay 12 or 18 uh per annum on a going basis so what they will do is they
will maybe charge you six percent six to eight percent uh per annum as interest and
the remaining six to ten percent will be approved which you have to pay along with
the principal so it is the the structure is such where it is not too heavy on the
servicing part it is mostly I mean most of the debt needs to be paid back at
maturity I mean along with the interest so some partial servicing happens in form
of interest but uh bulk of the money has to be paid back only at maturity which can
be in two years three years five years depending on the particular situation now
another good part of uh hedge funds I mean like is like banks in Indonesia will not
take any land as a collateral they want some building on the top of the land they
just cannot take purely land as a collateral so they cannot take shares as a
collateral so the hedge funds are in a position to take land shares as collateral
plus they can also provide financing for some businesses like Community businesses
where Banks feel too much of a reputation risk right Banks may not be comfortable
providing money to like say a hospital or I mean um I mean certain other types of
businesses which are Community Driven I mean like right they feel the risk is too
high if the default happens they cannot enforce so hedge funds are that way a
little more flexible when it comes to I mean providing financing uh they can also
overcome issues like pep EST uh negative negative profitability or losses on the
books I mean you know a lot of other issues that the businesses might be facing
which doesn't allow the business to go to the bank the hedge funds can overcome all
those issues and provide you a lot of flexibility when they provide you these loans
uh typically when hedge funds come and participate they do not insist on any board
participation or management participation now the third form of a capital basically
is a private Equity placement I mean a minority Equity placement with these private
Equity Funds this is typically structured either in form of equity shares or
convertible debentures are detected right so sometimes uh the private Equity Fund
is not sure of the performance but they still want to take Equity so they will
first take uh issue give you a loan which is priced uh very efficiently say at
eight percent per annum or something like this and after two years or three years
when the performance of the company is better then they will convert the loan into
Equity now if the performance is not good then they will ask you to pay back the
loan I mean like after three years but if if the performance is good and you meet
your targets whatever you promise to the private Equity Fund then it will get
converted into equity uh their written expectations on an overall basis is between
80 to 25 but if it's a pure Equity investment then typically uh the business owner
or the business the company doesn't have to worry about providing this return on
this return is typically I mean it comes from either through IPO proceed or I mean
it comes basically in form of sale to a strategic investor so unless I mean the
industry I mean so the company which takes the capital the owners of such company
have agreed on a put option that the investor might exercise where there is a
minimum guaranteed return which which the owner of the business has to provide to
the private Equity Fund then there are obligations but if there is no public put
option agreed in the deal then the company or the investee company does not have
any obligation to pay or give any return other than the dividends and manage the
corporate governance now in this situation normally the private Equity Fund would
ask for some kind of a management representation both seats and all that so that
they have enough oversight on the on the business practices I mean like and they
can kind of flag it whenever they see I mean you're doing something wrong so this
the only flip side of our private Equity is that it involves dilution of the
ownership of the ownership now the other uh form of capital private capital is
private Equity but they come and acquire my majority shares so this is a out and
out Equity shares deal I mean like there is no loan component in this these are
normally I mean buyout scenarios or like the business really needs a lot of capital
and the business owner does not have Capital to grow that uh business then he will
become a minority uh investor and he will let the private Equity investors become a
majority but who provides all the growth capital for uh growing the business
likewise if you have some outstanding debts npls loans basically which which you
are not able to settle then these private Equity Funds can come and take over the
businesses I mean like uh help you with all the debt resolution because a lot of
times your banks will ask for personal guarantees of the owners private personal
assets like houses and other assets are taken over by the Banks and if and if it's
a non-performing loan kind of a scenario and the risk or if the banks are trying to
drag the owners to pkpu or invoke their personal guarantees uh in that scenario the
letting go of majority in the businesses can come as a savior because if the
private Equity guys they like the business and they they can take over the majority
then normally they will take over they will help you settle all the debt the debt
resolution will happen that will also help the owners release their private uh the
personal guarantees release their personal assets so although it might mean that uh
you have to let go of the business but that in any case is going because it is with
the administrator or pkpu is involved or I mean life is not easy so uh having a
private Equity guide to come in and take over majority might be a boon in Disguise
in a scenario like that so here typically I mean the way they value their
businesses such businesses they look for 80 to 25 returns in U.S dollar terms I
mean uh now if it's a out and out buyout kind of a scenario where the company is
doing very well and the private Equity first wants to buy it then they can pay a
lot of premium for a majority buyout so not every conversation involves a
distressed or a turnaround strategy there are businesses which get sold because of
a premium that the investor is willing to pay to the uh existing owner of the
business the exit I mean like for such private Equity investors is typically
through IQ or a sale to a strategic buyer in future and they can be in these deals
for like at least four to seven years sometimes they can hold the asset for like
even eight years nine years ten years so a good example of a private Equity player
with a majority I mean focus is a North star group in Indonesia or Saratoga capital
I mean like they did a lot of such deals I mean uh these days uh clear door is
quite active Falcon house is Falcon capital is quite active I mean cap Square
Partners they're quite active who are doing these uh types of deals in Indonesia I
mean the local investors who do this I am sure most of you would have heard their
names so the private Equity minority private Equity majority so these are some of
the players that you have in Indonesia but then there are like hundreds of players
who are in Singapore who can do similar products and who can provide more capital
or more flexible options I like now obviously when it comes to private Equity
majority the management and boot control uh is it it goes without saying I mean
like so these guys will come and take control of the board they will control the
management the existing owners can continue to still operate the business I mean
like they can retain a significant minority but there is a lot of intervention or a
control that a private Equity Fund would exercise when it acquires a majority
stake uh okay now these are like some of the advantages of offshore financing and
structuring so obviously I mean uh the the amount of capital that is involved in a
place like Singapore Hong Kong I mean it's it's it's it's a large pool of capital
right uh you can even do a deal which involves basically a billion two billion
dollar kind of a deal can be done out of uh Singapore I mean there are uh investors
like tamasai GIC or Azana or you know some other private Equity Funds who can who
have the ability to write a billion dollars of a check for a single single
transaction basically obviously there are investors who can do smaller tickets of
10 million 15 million 20 million as well but large deals I mean like especially the
infrastructure assets or big assets I mean like build the big office building say
in sudhirman or big hotels in Bali five-star Resorts and all that there are enough
investors in this part of the world who can give you 200 million dollars 300
million dollars for a single situation like say the malls I mean like which are
worth I mean like hundreds of millions in in Jakarta say Plaza Indonesia or Grand
Island these assets I mean can be easily acquired of enhanced by uh the investors
in Singapore so the transaction sizes can be really huge I mean uh when it comes to
existing Capital offshore now the wide pool of investors right which is very
important so there is a good ability to create a competitive tension between all
these players if like all the major Global Investors have offices in Singapore they
use Singapore as a launch pad or as a base to invest across southeast Asia and
South Asia and China basically right so they they have uh Global teams they have
Regional teams who will go travel to Indonesia I mean like uh and invest in uh
situations I mean like uh and and because there is a lot of choice of investor we
can basically try and negotiate food terms because every investor has a different
way of looking at things so we can find the most appropriate investor for the
businesses or business owners in Indonesia depending on their requirements and the
business needs now the capital obviously when it comes to Singapore uh it's it's
efficient I mean like uh typically I mean interest rates like this is more
applicable in case you structure your businesses hold your businesses out of
Singapore rather than holding them to Indonesia because once you have a holding
company structure in Singapore then you get access to the bank financing in
Singapore where the rates are typically lower as compared to Indonesian bank rate
scientific so so you can access uh the plus you get access to bonds something like
private bonds or bonds and all those structures because Singapore uh like people
see Singapore is a lower risk uh place with better corporate governance and all
that so you get a little bit of a premium if you are holding the business the
business can be in Indonesia I mean like it's just that the holding company if it
is in Singapore it it gives you a certain premium in terms of your ability to
access Capital it's it's much cheaper as compared to if you were to go to like uh
same business having a donation goes and raises money from a donation Bank versus I
mean sale business which is held to a Singapore uh holding company raises money
through a Singapore Bank you can easily save like 150 bibs on the same deal same
transaction same same usage of capital for for that can be a lot of saving I mean
like on a 50 million dollar deal if you save one percent or one and a half percent
that that is quite a lot of saving money right likewise uh it can be tax efficient
I mean Singapore has double taxation avoidance treaties across asean uh plus I mean
it has treaties with a lot of other Global Financial hubs so when you're raising
money for Singapore structure uh you do get advantage of these various tax treaties
which are in place uh I mean with uh countries like Indonesia or like other
Financial hubs I mean so it becomes a transaction can become more tax efficient
likewise say somebody has a hotel in Bali Resort in Bali now when you sell a resort
in Bali you attract a very high capital gain tax of more than 25 percent plus
personal taxes as well I mean like so you there is double incidence of tax where
you first pay uh the company pays the tax and then the owners pay the tax now if if
I mean such asset is held through Singapore and we transfer the asset to a
Singapore roll to at a lower cost so we pay the capital gain tax basically a lower
capital gain tax in Indonesia to begin with but then when you sell it in Singapore
uh you pay zero taxes in Singapore because capital gains are Excel so any sale of
hotel or a resort will be seen as a Capital Grille so capital gain is exempt in
Singapore likewise the Dividends are tax-free in uh Singapore so the owners also
don't have to pay any uh tax on the dividend income that they receive so there can
be quite a significant amount of tax efficiency that can be generated by holding
Assets in Singapore or some other offshore places like Hong Kong or Dubai now the
third option I mean like is innovation right because uh these are like uh
sophisticated markets I mean like Singapore I mean you know there are various types
of new products which are which are available for the companies like spec listings
crypto tokens there are Insurance backed structures I mean like which can be used
to reduce the cost of financing so these Solutions are typically available to I
mean uh companies or I mean no structures which are held out of Singapore because
Indonesia I don't know if it allows for crypto or specs I mean Insurance back
structures are still possible for Indonesian companies uh held out of Indonesia but
spec crypto tokens there might be limitations to do it outright if the structure is
in Indonesia so uh along with that uh the flexibility and bespoke which I explained
to you earlier I mean like the investors the hedge fund investors private Equity
investors State Finance funds they can customize solutions they can you know make
Solutions or design Solutions which work for a particular situation which work for
a specific business uh through some Innovative and creative structuring I mean like
on the transaction so you know that's how they manage risk that's how I mean like
they they ensure that all parties have a win-win solution now this is basically a
typical fundraising process as to a fever to come in and how we will be basically
helping you raise the funds now we obviously screen the the first step is to screen
the uh investment opportunity I mean like uh we understand what are the
requirements what are the challenges that you face what's your ultimate objective
uh and and we don't really uh go with with any preconceived notions or or uh cookie
cutter Solutions so we customize Solutions I mean like based on your requirements
uh so we will propose two or three solutions or uh you know how the business can uh
be optimized and once uh I mean Arrow strategies and particular client reaches an
understanding okay this is the way forward we will also give you some indicative
guidance on what kind of terms are expected to come from the lenders and once that
is agreed then uh the client will have to formally give us a mandate to undertake
the assignment so it's engagement I mean so you engage us I mean like the second
step is to engage us uh the third step is to prepare I mean uh the deal documents
transaction documents like information memorandums Financial models industry comps
uh the legal kyc documents data room uh the transaction structure deal page so this
is something that is uh the third part of this uh Journey now we will we typically
I mean like uh we can do these information memorandums Financial models for the
client but we will charge a small professional key for doing that work now if the
clients are okay I mean like to do it uh themselves uh we will not charge any money
for such uh work I mean like because we will not be doing it ourselves the info uh
so believe it to the client whether they want uh to use us for doing an information
memorandum Financial models I mean like I mean um so uh I mean so it's basically I
mean uh it's it's up to the uh client like to decide whether whether they want to
want our services to make these information memorandums Financial models but the
data room I mean like we will help you do a data room I mean like uh it can be on a
Google drive or it can be on intra links whatever will help you prepare a data room
uh then obviously we'll help you with the transaction structure I mean like decide
a transaction structure which becomes a part of the deal patient like now once this
is all done then we make a teaser I mean like a No Name teaser which is basically
made and we Market the deal with the various Capital providers and investors uh
across Singapore Hong Kong Indonesia and we we Liars with these investors to uh to
understand your business uh well uh we help them to carry out the due diligence uh
as a part of the process uh once I'm in the due regions has been done the initial
decisions has been done the investors will issue a initial term sheet and there
would be some negotiations that will happen between the investor and the uh the
company where we will help bridge any gaps between the expectations of both the
sites so negotiation stage once the negotiation has been settled and the uh term
sheets have been signed then the uh investors will hire lawyers accountants third
party Consultants to do the final due diligence and once subject to diligence being
okay uh there will be a binding offer that will be provided by the investor to the
uh borrower basically and the last would be uh the uh the last stage would be the
legal documentation security creation loan agreements uh share purchase agreements
and disbursements and funding so we are going
to be involved in each and every stage uh till funding and disbursement uh you
will only pay us if it's a pure success assignment you only pay us uh uh after I
mean like the funding has been received by the client or by the company now I mean
a lot of companies we have seen that uh there is a lot of Temptation to go for an
IPO or I use IPO as an option to raise fund now what we have seen in Indonesia
there are a lot of companies with market caps of less than 100 million dollars I
mean who are publicly listed I mean the companies are listed now based on our
experience and the market dynamics any company that has a bit of less than 30
million dollars probably is not an ideal candidate to go for IPO because uh for
most cases okay there might be some exceptions but uh typically I mean I put that
to EV multiple EV to ebitda multiple that typically the market gives you is
something between 10 and 15 times depending on the business and the minimum market
cap that uh the fund manager the international fund managers mutual funds they look
at before they invest into a company it's at least a 500 billion dollar market cap
so if you are basically a 30 million dollar rabbit company I mean like with
basically 15 million uh 15 times a better multiple you are only looking at a
Enterprise value of 450 million dollars minus whatever your debt obligations are so
now assuming you are geared till 4X I mean like of your so there is a 100 million
dollar worth of debt so your market cap is only likely to be around 300 million
dollars now with 300 million dollars of market cap uh most of the international
investors are unlikely to participate in the IPO uh why I mean so then the
company's ability to actually raise money through IPO is restricted I'm like
because only some local institutions local Pension funds or mutual funds they will
come and participate at best I mean like depending on who your Banker is and how
strong he is in terms of the placement but the businesses typically struggle to
raise sufficient Capital through the IPO in most cases uh that's what we have seen
I mean like so but once you've gone public with with uh with a 300 million market
cap kind of a scenario then uh the issues are many I mean like what it does is that
there is very little liquidity in the stock I mean insufficient Capital rates I
mean like and but the worst part is that that once you've gone taken your company
public or you've listed it then you lose access to private capital from hedge funds
private Equity Funds as well because they do not want to take Mark to Market risk
because once you're listed which means every day there is a nav and if the stock
price fluctuates then they have to also accordingly I mean uh take a hit on their
portfolio value basically so most private Equity Funds hedge funds they stay away
from uh publicly listed companies so then there is no Capital you know the outcome
of all this is that as a business it gets stuck because you can't go to private
Equity hedge funds and you don't have enough liquidity in your stock which allows
you to tap capital from the market so the businesses start stagnating I mean like
to a large extent and then only have to rely their cash flows to eventually grow
very slowly back so we uh and the bus uh like the issue is I mean like this is one
part I mean there is of capital a limited Capital that comes with a listing but
what it brings along with is there are high levels of corporate governance as a
listed company you have a lot of obligations I mean like to fulfill which includes
very high levels of portrait governance compliance and regulatory requirements
which includes appointing a big four auditor or like a good audit firm I mean like
has to be your auditor so it increases your compliance cost I mean compliance
requirements compliance cost uh you need well experienced management and Senior
leadership who is well versed in managing and running listed companies so higher
cost of human resource uh you have to keep disclosing a lot of information to the
market which also provides excessive insights uh into the business plans and
performance of the company so it might put you at a certain amount of disadvantages
compared to the uh your competitors so in fact we had one case recently where I
mean Indonesian based company which was listed in Singapore they were bidding for
like some some projects in Indonesia and they realize that because of these
disclosures I mean like that they have to make their competitors were getting an
unfair advantage over their ability to bid for such projects so then they have
recently gone for a delisting and uh delisted their company from Singapore Stock
Exchange so it happened with a very large uh uh conglomerate uh company in uh
Indonesia Indonesian company which was listed here now you always have a pressure
to maintain the stock price I mean because a lot of times the holders might have
gone for a repo financing or a share financing once you are listed and with that uh
I mean uh there is basically a pressure to maintain the strong price so that you
don't have margin calls or pressure from the repo financiers to top up top of the
uh provide Top-Up share so provide the margin I mean whatever the cash call is uh
the last but not the least uh the criminal and civil liabilities because of the
pressure to maintain the stock price the owners and the Senior Management is
tempted to kind of do some indoor dressing and misrepresent or like carry out
certain things which they should not ideally do that brings a lot of civil
liabilities and criminal liabilities for the owners for fraud mispresentation
negligence they found out so that's again a risk of uh having a listed company
which is not ready for our listing as yet now what when will be a good time to IPO
right I mean like that's that's uh more important question I mean like so what we
typically see in these markets the companies which have achieved a bit of 30 by 250
million dollars are ideally placed to tap Capital markets via IPO because with a 50
million dollar ebitda your ability to have a market cap of between 500 million
dollars to a billion dollars is quite High I mean like you will be able to get a
market cap in that range and that is where all the international fund managers
attract I mean get attracted to invest so this allows for I mean like sufficient
Capital being raised to IPO uh so if if the sufficient participation is there from
the international investors which gives you a good nice sufficient free float uh
which also ensures decent levels of corporate governance and investor rights
protection early life so which basically it's like you do one thing and it leads to
another rhyming life right and uh so there is a healthy subscription basically with
enough liquidity I mean like uh this is the only succession of the ipu and it
allows you to raise the necessary capital plus I mean then it opens up your bonds I
mean a lot of other things I mean like for you but the right time is I mean when
you have a habit of at least 35 to 40 million dollars uh anything before that there
is a lot of risk as I explained before like so so from my side I mean this is uh
what what it is now uh if you have any questions queries I mean more than happy to
take those questions and explain it to you like give you the answers available so
please feel free tell what questions you have and he'll try to answer as many as
possible yeah running so yeah I asked some questions peace um do you you can hear
my voice yes yes okay thank you a quite a very comprehensive explanation thank you
very much my question is about the first is about the internal rate of return it is
um you said that it's the ranges between 10 to 18 and sometimes to 25 do you have
uh a certain standard for certain uh SEC sector for instance for hot industry do
you have a certain standard that the minimum internet and return that you start to
accept the uh Eastman investment preparation for the company or and the other
question please just concerning the information memorandum the preparation of
information with them could you give us a picture how much is it it's depend on the
size of the company or is depend on the the complexity of analysis that you have to
make concerning the information memorandum and the third question is about the due
to religion processes who will pay the diligent processors is this the investor or
the company that you are going to have the diligences thank you very much thank you
Parisa uh so the first question I mean like you mentioned about the hotel so see if
it's the operating Hotel I mean uh say a performing hotel in Bali which has cash
flows now for hotels or Office Buildings which have tenancy or which have cash
flows then typically uh the 10 to 18 Capital the rate of return internal rate of
return does not apply the expectations of the investors for such assets is much
lower typically up between 8 to 12 percent so they what they will do is when they
give you a valuation if they are buying a hotel or if they are buying basically uh
office building uh so say suppose your ebitda is five million dollars so they will
just divide this five million dollars by eight percent so that gives you something
like a 40 million dollar valuation only right so so uh so the any rental editing or
uh asset which is real estate back the rate of expected the real estate expectation
the rate of return is much lower it can be between 8 to 12 now having said that now
we have a scenario basically where uh there is a resort being developed in uh
Indonesia in Bali now the owners could only finish 90 of the project and uh the
project has been stuck because of lack of capital so they need some Last Mile
financing to finish the project now in this scenario if I was to arrange a loan
basically because most most buyers do not want to buy stock products most I mean
like there
are some who buy but most of them do not want to buy stock projects so we have to
go to the market go to some hedge fund or a private Equity Fund to raise capital
for uh to finish the project before we can go to the market and sell loan the
interest rate expectation would be like 12 to 15 percent so okay yeah so so that I
think settles your first uh question okay yeah now the second question was about uh
uh the cost of uh the the cost of doing an information memorandum and uh uh the
financial model so normally it depends on the complexity of the task I mean it is
it is not uh determined by the size of your company because the amount of work that
is required to be done is same whether it is a 20 million dollar company or whether
it is a 200 million dollar company I mean so it is based on the specific task I
mean like uh but it is not I mean see if you go to a big four depending on the
complexity that is what the big post charge I mean like in Indonesia now we are
comparatively much cheaper I mean like we are a fraction of this uh I mean uh this
this cost I mean like so much much I mean uh you probably pay like one third or
like even less than one third of these values uh depending on the complexity so
because we don't believe in making money from doing the presentations or making
Financial models we charge a success fee I mean like so every time we raise Capital
we charge our fee I mean like on a successful Capital raise and we believe in
making our profits or our money through a capital race successful Capital race so
we are fully aligned with your interest we only make money if you get the money I
mean like we don't really benefit out of making Financial presentation Financial
info memos or financial models uh like in context of Singapore where the cost of
living is very high the money that we charge does not even cover for the expenses
but it is just to make sure that our I'm an effort is paid for I mean right but we
are not looking to make money out of that process so that is the second question so
third part is on due diligence now typically the investors will pay for the due
diligence the the borrower or the company I mean does not have to pay for the due
diligence unless the investor has a investor believes that the books have been
window dressed I mean there is basically certain amount of fraud that might be
coming out of such due diligence if there is a very strong of such strong sense of
such a scenario but they are still Keen to explore they might put some obligation
on the borrower to pay for the due diligence in in case the findings of social
religions are negative right where they feel that okay the company because there is
sometimes rumor right about a company in the market that these guys who did some
fraud or there was some hanky-panky stuff going on in the company now the if the
investor likes such business but he's worried about such rumor then he might say
okay I will do that due diligence I will incur the cost but in case if there is
basically a fraud which comes out or if the rumors are true then you have to pay
for this due diligence cost but if no just rumors are false then no need to pay the
investor will pay the cost but if it is a clean situation no rumors nothing uh 99
of the times the due diligence cost is paid by the investor thank you thank you
thank you for the application foreign okay yes please yeah yeah okay thank you Mr
Google I would like to know about uh open racing for insurance company because this
momentum to uh in Indonesia uh in certain companies should have uh fundraising and
for Capital until 1 trillion at least at least one trillion until 20 20. 2027. yeah
uh okay and then this I think this uh momentum to uh offering the uh the insurance
company Mr Nares I have talked to my friend and my uh I said Association uh uh
because I have I joined the uh president and then I have talked to uh head of uh we
as Insurance Association Mr gaurav yeah so uh they have uh what is a program to uh
send the information like this yeah uh to information about fundraising this is so
useful for uh insurance company yeah this is the timing to uh um yeah okay even
though I have I said uh invite my friend from incident here and or from banking to
thank you so much thank you so for insurance I understand that there are some new
regulations which are proposed which increases the capital requirements clear one
Capital requirements of the insurance companies now there will be a lot of uh I
mean investors in Singapore I mean they would be Keen to come in and uh assist such
insurance companies uh in terms of meeting their obligations towards uh the
insurance uh tier I mean the capital whatever the tier one Capital that they need
to have uh so depending on uh the claims right because uh a lot of insurance
companies we have worked on a few in Indonesia unfortunately during covet I mean
they had a lot of claims and their Equity was wiped out in that I mean during those
times so if the balance sheet is still healthy uh we don't really see any reason
why the investors in Singapore or Hong Kong will not have interest to come and
participate in helping these companies who uh comply with their Capital
requirements tier one Capital requirements so now we can discuss on a case-by-case
basis I mean if you can share so we can meet uh separately for a specific
discussion I should be coming to Jakarta in June most likely I mean like I should
be coming there I mean I come every month uh no I did not come last month because
of labor on holidays but uh I come normally every month so either we can have
another session like this specifically targeted towards insurance companies through
our association where we can put some ideas on the table as far as insurance
industry is concerned how it can be done but yes uh capital is available for
insurance companies to comply with the capital requirements as regulated by Bank
Indonesia or Jacob yeah right okay Bank Indonesia doesn't have anything with to do
with the insurance here okay so um whosoever is a regulator yes all right we're
pretty close to the time if the other questions happy to answer if not feel free to
contact us my name number with you most of you are talk to buddhi who also invited
some of his friends so feel free to talk to us and I like to close by thanking
gaurav for taking time to share uh his knowledge with us and sharing what can be
done and to pop buddhi for co-organizing with me to get people today thank you
papudi and to All of You Who Came appreciate your time and effort today so thank
you so much everybody thank you yeah thank you thank you [Music]