In a strategic move to stabilize its financial standing, PT Fast Food Indonesia Tbk (FAST), the operator of KFC in Indonesia, has secured a capital injection of Rp80 billion from its major shareholders, the Salim Group and the Gelael Group. This infusion aims to address the company's negative working capital and support its ongoing operations.

Background of the Capital Injection

As of December 31, 2024, FAST reported a negative working capital of Rp1.26 trillion, with short-term liabilities reaching Rp2.01 trillion. This financial strain prompted the company to seek additional funding to maintain its operations and fulfill its obligations. The capital injection is facilitated through a private placement mechanism, where the company will issue approximately 533 million new shares at a price of Rp150 per share. This move is expected to raise Rp80 billion, providing much-needed liquidity to the company.

Details of the Private Placement

The private placement involves two major shareholders: PT Gelael Pratama and PT Indoritel Makmur International Tbk (DNET), affiliated with the Salim Group. Post-transaction, PT Gelael Pratama's ownership in FAST will increase from 40% to 41.18%, while DNET's stake will rise from 35.84% to 37.51%. Consequently, the public's shareholding will be diluted from 16.18% to 14.27%.The Extraordinary General Meeting of Shareholders (EGMS) to approve this private placement is scheduled for May 16, 2025. If approved, the transaction is expected to be completed by June 20, 2025.

Financial Performance and Challenges

FAST has faced significant financial challenges in recent years. In 2024, the company reported a net loss of Rp796.7 billion, a 91.67% increase from the previous year's loss of Rp415.6 billion. This downturn was accompanied by a 17.85% decline in revenue, which stood at Rp4.87 trillion in 2024, down from Rp5.93 trillion in 2023. The company's financial woes have been attributed to various factors, including increased operational costs, declining sales, and external pressures such as consumer boycotts. In 2024, FAST closed 47 KFC outlets and laid off 2,274 employees as part of its cost-cutting measures.

Market Reaction and Outlook

The announcement of the capital injection led to a 10% drop in FAST's share price, reflecting investor concerns about the company's financial health and the dilution of shares. However, the management believes that this capital infusion will provide the necessary support to stabilize operations and pave the way for a potential turnaround.

The company plans to utilize the funds to improve its working capital, invest in operational efficiencies, and explore new revenue streams. By addressing its immediate financial challenges, FAST aims to restore investor confidence and strengthen its market position.

Conclusion

The Rp80 billion capital injection from the Salim and Gelael Groups represents a critical step for KFC Indonesia in navigating its financial challenges. While the company faces an uphill battle to return to profitability, this strategic move provides a foundation for recovery and future growth. Stakeholders will be closely monitoring FAST's performance in the coming months to assess the effectiveness of this intervention.