In the driver’s seat

By webadmin on 09:59 am Jun 01, 2012
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Tito Summa

Andianto Setiabudi’s ambition for Cipaganti Group, the company which he founded and continues to lead, is for the organization to be forward-looking and become one of the best in the country.

Sharing his thoughts with GlobeAsia, Andianto observes that a leader should not set a limit to which his company can grow. “When you think locally, the company will only grow locally,” he says.

Cipaganti is best known for its shuttle services often seen plying the toll road connecting Jakarta and Bandung, where the company is based. “In the land transportation business, we may not be the largest taxi operator or have the largest fleet of shuttle services, but we are certainly the most complete,” observes Andianto.

His is not an empty claim. Cigapanti offers a wide range of services from taxis, shuttles, tour buses and rental cars to courier and cargo services. Land transportation, while the largest contributor to the group’s revenue, is only one of division of Cipaganti. It also has interests in banking, property, heavy equipment and – its latest foray – coal mining. 

The journey so far

Andianto had his first taste of business as a teenager working with his father, running a snack company in Bandung. At its peak, the company owned and operated a large factory before a volcanic eruption in 1982 devastated the agriculture sector and drove commodities prices up.

Business crawled to a standstill. Instead of being disheartened, Adianto instead used his spare time to repair and sell the company’s cars. The venture, to his surprise, generated a tidy sum; Andianto started to delve deeper into the business.
He set up a used-car showroom on Jl. Cipaganti in Bandung, West Java in 1985, and when this business, too, began to stall, Andianto moved into car rentals.

The land transportation division now operates more than 6,500 minibuses, taxis and tour buses and has a strong presence with over 100 branches in Java, Bali and Kalimantan. In the heavy equipment business, Cipangati has more than 650 machines and nine branches in Java, Kalimantan and Sumatra.

According to Andianto, Cipaganti’s recipe for success lies in growing in stages. “For 27 years since its inception, Cipaganti has grown organically; we focus on our initial business and see what kind of opportunities that brings us,” he says, referring to a process in which a company strives to boost productivity and sales in order to grow rather than through mergers and acquisitions.

The next big plan for Cipaganti is an initial public offering scheduled for June. The company plans to release between 30% and 40% of its shares to the public, and raise approximately Rp750 billion in the process.

Cipaganti’s IPO will include only three of Cipaganti businesses: land transportation, heavy equipment and coal mining. “We will develop our property and banking business separately and hopefully both will have their own IPOs in the future,” observes Andianto.

The IPO is necessary, he says, for the company to grow. “With public support, the company will become more aggressive in pursuing acquisitions or become more trustworthy in issuing bonds.”

He is optimistic that the IPO will attract a lot of investors. “The three businesses are in line with the characteristics of the country. Land transportation services will still be needed for many years to come; Indonesia is rich with mineral resources, a good thing for our heavy equipment business, and coal is one of the most sought-after energy commodities in the world, and Indonesia has plenty of it.”

Jeffrosenberg Tan, head of research with Sinar Mas Sekuritas, observes: “The Cipaganti group has proven its supremacy in the (land) transportation business.” However, he believes Cipaganti should stick with the businesses that it truly excels in.

“Although there might be other lucrative business such as coal mining, the management must decide on one area, and one area only, so that it is able to give 101% of its energy, time and effort to one specific area that nobody else can do better.”

Speaking about the IPO plan, Andianto says Cipaganti has prepared itself by transforming itself into a professionally-run company. “Cipaganti is no longer a family-run business,” he points out. Although he admits that letting other people call the shots in the company can be difficult, he notes that such transformation is necessary.

Flying high

Mulyono, Cipaganti’s chief operating officer, says that the company’s net assets stood at Rp1.3 trillion as of last year. “Last year’s revenue was Rp700 billion while net income was around Rp40 billion.”

He reveals that in the future, coal mining will constitute a larger part of Cipaganti’s business. “Today 60% of our revenue comes from our land transportation business; we are planning to reverse the trend with our coal businesses at the top.”

For starters, Cipaganti is looking to acquire a coal mine with reserves bigger than those the company currently has: three coal mines in East Kalimantan with combined reserves of 3 million tons. “Our coal business is still small, but we are hoping that the IPO will provide us with capital to make it bigger.” says Mulyono.

Bertrand Raynaldi, head of research at eTrading Securities, says that venturing into the more lucrative coal mining business will attract a lot of investors. “Competition in the land transportation business, especially in shuttle and taxi services, is fierce,” he notes.

Another big plan for Cipaganti is to venture into the airline business, with 2015 set as the target for its first flight.  Andianto says that the airline plans are progressing very well. “We are still looking at the legal procedures on the plan for airlines, but for now we are focusing on the IPO.”

The airline will serve routes to and from Bandung. “Bandung is our city, where we have the largest captive market, and by focusing our business in the city is our way of saying thanks to Bandung.”

Cipaganti will also continue developing its land transportation business. “Although its portion would be smaller in the future, we will still develop it, because we made our name in land transportation,” says Andianto.