Jakarta. Shares of rice and processed food producer Tiga Pilar Sejahtera Food nosedived on Friday (21/07) after police raided its rice warehouse in Bekasi, West Java, the previous evening as part of an investigation into alleged illegal practices.
The company's shares, trading under the AISA ticker symbol, closed 24.9 percent lower at Rp 1,205 apiece on Friday, compared with a 1.03 percent decrease in the broader index.
The National Police's Criminal Investigation Unit (Bareskrim) confiscated about 1.16 tons of rice at the warehouse, which was allegedly used to store and distribute state-subsidized rice passed off as premium rice.
National Police spokesman Insp. Gen. Setyo Wasisto and National Police chief Gen. Tito Karnavian held a press conference on Friday to announce the result of the raid.
The subsidized rice is intended for distribution under government welfare programs, including rice social assistance, or Rastra, undertaken by state procurement agency Bulog.
The warehouse is controlled by Indo Beras Unggul, the rice producer and distributor arm of Tiga Pilar Sejahtera.
Indo Beras allegedly bought unhulled rice from farmers in various areas at a premium price of around Rp 4,900 (37 US cents) per kilogram, compared with the state-subsidized price of Rp 3,700 per kilogram, in a bid to outcompete other buyers and to ensure a steady supply for its distribution business.
After polishing the unhulled rice, the company allegedly sold the packaged product at Rp 20,400 per kilogram – nearly three times more than the subsidized product, which is typically sold for between Rp 6,000 and Rp 9,000 per kilogram on the domestic market.
Agriculture Minister Amran Sulaiman said the illegal practice potentially resulted in trillions of rupiah in state losses.
Based on a laboratory result, police also suspect that the nutritional quality of the two rice brands, Maknyuss and Cap Ayam Jago, did not match the information stated on the packaging labels.
The 2-hectare warehouse also contained 100 tons of ready-to-sell rice, repackaged as premium products.
Police are still looking for the warehouse owner.
Tiga Pilar Sejahtera derives the bulk of its revenue from the sale of rice, which contributed 68 percent of the company's total sales at Rp 1.45 trillion in the first three months of this year.
Processed foods, including snacks and noodle products, make up the remainder of the company's sales.
Subsidiary Dunia Pangan, based in Sragen, Central Java, operates Tiga Pilar Sejahtera's rice business unit. It controls five rice producer units, including Indo Beras Unggul.
Indo Beras's total assets stood at Rp 1.35 trillion at the end of March, 1.45 percent lower compared with the same period last year, according to Tiga Pilar Sejahtera's first-quarter financial report.
Dunia Pangan booked Rp 300 billion in net income last year, which contributed 50.6 percent of Tiga Pilar Sejahtera's total profit. Dunia Pangan's factories have an annual production capacity of 480,000 tons.
However, Reza Priyambada, an analyst at brokerage firm Binaartha Sekuritas, said the negative sentiment towards the company's shares is only temporary, because it still has strong fundamentals.
"Despite the company having booked lower revenue in the first quarter of this year, its business is still promising, as it produces rice products, the staple food of most Indonesians," Reza said.
Tiga Pilar Sejahtera's Rp 1.45 trillion revenue in the first three months represented a 14.4 percent decline compared with the corresponding period last year. The company also saw a 15 percent year-on-year decline in first-quarter net income.
In a filing to the Indonesia Stock Exchange (IDX) on Friday, Tiga Pilar Sejahtera denied the allegation, saying that the company is fully committed to its customers and that it has always complied with the applicable laws and regulations.
"We are cooperative and transparent with the authorized parties. We are currently coordinating with both internal and external [parties] to verify all the facts [related to the case]," Tiga Pilar Sejahtera said in a statement signed by its director, Jo Tjong Seng.
The company claims Indo Beras always buys unhulled rice from its local partners and never repackages it as premium products. It added that Indo Beras complies with the nutritional label requirements by using an accredited laboratory to determine the nutritional levels stated on its products.
The company added that it produces rice products based on the Indonesian National Standard (SNI) and that it is also ISO certified in terms of food safety.