Jakarta. Magna Finance, a listed financing company, plans to quit its struggling lending business and shift its focus to the rice trade, the company said on Thursday (16/02).
The company is set to sell its loan portfolio to rival Batavia Prosperindo Finance for Rp 56 billion ($4.2 million) by June, Himawan Bradja, Magna's corporate secretary, said.
Magna will use the proceeds from the sale and an additional Rp 7 billion from its cash reserves to acquire 94 percent of the shares in Padi Unggul Indonesia from Sutan Agri resources, a Singapore-based firm.
"Business prospects in the rice industry are quite good. The company has decided to invest there, because Magna Finance wants all shareholders to benefit from holding our shares," Himawan said.
Padi Unggul is based in Ngawi, a rice producing center in East Java, and has a capacity to process 200,000 tons of unmilled rice a year according to its website.
Magna projects Padi Unggul could generate Rp 372.9 billion in sales this year and triple that to Rp 1.03 trillion by 2021.
Magna's financing business has been in shambles. The company posted Rp 65 billion in losses in the first nine months last year, having failed to compete with other financing companies to attract qualified customers.
Himawan said shareholders have approved Magna's plan and expect it to start the new venture in the second half this year.
Markus Dinarto Pranoto, the president director of Batavia Prosperindo, said the company will raise Rp 67.7 billion from a rights issue to fund the takeover of Magna's loan portfolio.
Markus said the company appraised the Magna loans at Rp 477 billion. Batavia Prosperindo will also acquire all of Magna's 27 branch offices across the country.
With the acquisition, he projected Batavia Prosperindo's total assets will grow by 80 percent this year to Rp 1.8 trillion from Rp 1 trillion last year.
"This is an alternative to inorganic growth. If we develop it ourselves, it would not grow so fast," Markus said.