Sunarso: Pegadaian Transforming Business through G-Star Generation

Management of PT Pegadaian - Photo by TheInsiderStories

JAKARTA (TheInsiderStories) – PT Pegadaian has set a plan to transform its businesses through G-Star Generation with 5G’s strategy — Grow Core, Grab New, Groom Talent, Gen-Z Tech and Great Culture.

President Director of Pegadaian Sunarso said, the state-owned pawnshops company opens to create new businesses through the program. On April, 2, Pegadaian will launch Digital Services and Pegadaian’s agent and will start earning credit segment under Rp500,000 and without interest, he said.

In term of capital, Sunarso assured that Pegadaian’s capital is very strong to finance the company’s program in the following years. This month, the company has issued local bonds worth Rp3.5 trillion (US$ 255.47 million) with coupon rates in the range of 5.80 to 7.10 per cent with tenure of between 370 days to five years.

The company also issued Shariah Medium Terms Notes (MTN) worth Rp 500 billion with tenure of three years and coupon rate at 7.0 per cent. This year, Pegadaian still has additional plan to issue local bonds around Rp 2.5 trillion and Shariah Medium Terms Notes (MTN) up to Rp 2 trillion for business expansion and debt refinancing,

In 2017, Pegadaian booked net profit of Rp2.51 trillion, incresed 13.72 per cent compared to previous year at Rp2.21 trillion, with total revenues reaching Rp10.52 trillion or up 8.53 per cent from Rp9.70 trillion in 2016.

Total outstanding loans stood at Rp36.88 trillion or rose 34.0 per cent from previous year of Rp35.47 trillion with total assets of Rp48.69 trillion in 2017.

The largest paw-shops in the country eyes 11.5 millions customers this year or adding 2 million customers from a year ago at 9.5 million, said senior official on Thursday (15/03).

To reach those targets, Pegadaian will implement digital service and expand the products. In order to get more insights about PGN’s plan, the Insider Stories interviewed Pegadaian’s President Director Sunarso. Following is the excerpts:

Q: What do you think about the presence of FinTech companies in Indonesia? Does Pegadaian feel threatened with their presence?

A: We have a similar business model, where we obtain funds from bank and we lend them to the customers.  However, we are stronger than them (FinTech) in term of infrastructure, capital, and human sources. We see this as a healthy competition.

What I am concerned the most is, the velocity of FinTech business in past years, the value of loan they lend today has reached 10 times higher than last year. They have a rapid gowth.

Q: How many agents do you have to reach out to customers?

A: Currently, we have 2,700 agents and we set target to have 6,000 agents this year. We are targeting to have 11.5 million customers. We will soon launch Pegadaian Digital Service, which is a digital application that will help bring young customers to us.

However, we still have conventional customers who need equal service and we have to be fair to them. We will still open new branch offices physically.

Q: What is the main target this year? 

A: We have ‘G5 Star Generation’ as the transformation program. In the first place, we will re-adjust our business situation into digital. We also have to prepare the technology particularly in hardware aspect. The digital transformation is not enough if we don’t also make adjustment in the cultural aspect or working culture and mindset. We want to create more value through this transformation  program. The first is financial value, which will be reflected in the company’s financial ratio. Therefore, we have to go public or launching the IPO (initial public offering).

Q: When will you launch the IPO?

A: We think 2020 is the most possible time. We don’t need to be hurry.

Q: Do you have any target of total asset?

A: We wish our asset will rise three times higher than now. Currently, our assets are around Rp50 trillion.

Q: Do you have an expansion plan through organically or inorganically?
A: Sure. Today as you know, we are flooded by tech-based products, and we can’t just walk away from the idea of inorganic growth, therefore we have to embrace it.

Q: Any plan to create a FinTech company?

A: Sure, we have thought about it, either we buy or establish it by ourselves. We will soon evaluate the best scheme.

Q: How much investment do you allocate for the transformation program?

A: For this year, in particular, we have set aside Rp1.2 trillion for capital expenditure, and Rp500 billion for IT development.

Q: What is your bottom line target?

A: We aim for Rp3.3 trillion in operational profit and Rp2.7 trillion net profit this year, and strenghten our customer base widely across the nation.

Q: How do you catch up with foreign competitors?

A: I think I will strengthen the collaboration between pawn and non-pawn products, and also we have to have a FinTech product.