By borrowing against the IDX shares it already holds. A controlling shareholder can fund its HMETD subscription with a stock loan instead of selling or accepting dilution, then pledge the new shares as further collateral, so the stake stays whole and the market sees subscription rather than a sale.
Key takeaways
- Commitment is disclosed. The issuer's announcement and prospectus state whether the principal shareholder will take up its rights, and a shareholder that commits must state that it has sufficient funds.
- The loan is secured on shares you already hold. It is drawn in time to pay the exercise price during the rights trading period.
- Rights on pledged shares stay yours. Under KSEI's rules, rights arising during a pledge belong to the pledgor unless the pledge instruction says otherwise; how to exercise them is agreed with the lender.
- The timetable is short and fixed. The recording date falls eight business days after effectiveness, rights are distributed a day later, and trading and exercise run for five to ten business days.
- Taking up your own rights pro rata does not trigger a mandatory tender offer. Buying extra rights or acting as standby buyer can be different.
Why do controlling shareholders commit to take up their HMETD?
To avoid dilution and to support the issue. A shareholder that does not take up its rights sees its percentage fall, and the market watches the principal shareholder's intention, because the issuer must disclose whether that shareholder will exercise its rights.
The disclosure appears in the announcement made when the registration statement is filed and on the front cover of the prospectus. A principal shareholder that commits must also give a statement, among the registration documents, that it has sufficient funds and is able to exercise its rights, with evidence of those funds (POJK 32/POJK.04/2015, Article 19).
In OJK's takeover rules, a principal shareholder holds at least 20% of the voting rights, directly or indirectly. Where the proceeds fund a transaction of a predetermined value, the issue must also have a standby buyer for any shares the rights holders do not take up.
Funding can be the constraint. A founder whose wealth sits in the listed stake may not have cash for a large subscription, and selling shares to raise it would defeat the purpose.
How does a stock loan fund the subscription?
The shareholder pledges part of its existing IDX shares and draws the loan before the exercise deadline, then uses the cash to pay the exercise price during the rights trading period. The new shares are issued within two business days of exercise and can then be pledged as well.
Sizing starts from the subscription amount: the exercise price multiplied by the rights to be taken up. The advance against the existing shares depends on their liquidity and volatility, as our guide to how much you can borrow against Indonesian shares explains, so the shareholder needs enough shares to support that amount.
Timing works backwards from the registration documents. If the loan is part of the evidence that the principal shareholder can fund its exercise, it needs to be agreed before the issuer files; what evidence OJK accepts is a point for the issuer's counsel.
A rights issue priced below the market can pull the share price down when the shares go ex-rights, reducing the value of the existing collateral just as the loan is drawn. Pledging the new shares restores much of that value, which is why the documents should provide for it.
Because the loan is a pledge, not a sale, the shareholder keeps its votes and its stake. If the pledged shares carry 5% or more of the voting rights, the pledge, and each whole-percentage change in the pledged amount, is reported to OJK, as our note on OJK disclosure and share pledge reporting explains.
What happens to HMETD on pledged shares?
Rights on pledged shares belong to the shareholder unless the pledge instruction says otherwise: KSEI's rules exclude rights arising during a pledge, such as dividends and other ownership rights, from the collateral. How the rights are exercised or sold still has to be agreed with the lender.
KSEI credits rights to the shareholder's account after the issuer's instruction, and exercising them needs an instruction to KSEI with sufficient funds; rights not exercised by the deadline are deleted. Where the whole securities sub-account is frozen for the pledge, corporate-action proceeds are frozen with it until release.
So check three things well before the trading period: whether the rights will be credited where the shareholder can act on them, whether the lender must consent to their exercise or sale, and whether the new shares are to be added to the pledge. Our note on dividends and corporate actions on pledged shares covers the wider picture.
Rights the shareholder does not need can be sold. HMETD are transferable, are listed on the exchange alongside the shares, and can also be traded off the exchange during the trading period.
How does the rights timetable line up with the loan?
Closely, because OJK fixes most of the steps. The registration statement becomes effective on the 20th business day after a complete filing, or earlier if OJK says so, and the exercise window opens about two weeks later, so the loan must be ready before effectiveness.
The 45-day effectiveness period found in older summaries no longer applies: POJK 45/2024 revoked it and set the 20-business-day rule. The table sets the main steps against the loan.
| Rights issue step | Timing and rule | Loan step |
|---|---|---|
| Plan announced; RUPS approves the capital increase | Plan disclosed no later than the announcement of the RUPS; at most 12 months from RUPS approval to effectiveness (POJK 32/2015, Articles 8 and 15) | Mandate, credit review and term sheet |
| Registration statement filed | Includes the principal shareholder's statement on exercise and funds (Articles 19 and 21) | Facility and pledge documents agreed; approvals in place |
| Registration statement effective | 20th business day after a complete filing, or earlier (POJK 45/2024, Article 2) | Pledge registered at KSEI; drawdown scheduled |
| Recording date | 8 business days after effectiveness (Article 30) | No loan action |
| Rights distributed | No later than 1 business day after the recording date (Article 31) | Rights credited to the shareholder's account |
| Trading and exercise | At least 5 and at most 10 business days after distribution ends (Articles 34 and 36) | Loan drawn; exercise price paid |
| New shares issued | No later than 2 business days after exercise (Article 36) | New shares pledged as further collateral |
| Additional shares | Payment 2 business days after trading ends; allotment within 1 business day; refunds 2 business days after allotment (Article 39) | Any order for additional shares funded; refunds applied as agreed |
Taking up rights pro rata, from rights the company issued to the shareholder, is exempt from OJK's mandatory tender offer rule even if other holders do not take up theirs and the holding rises. Buying rights from others, or acting as standby buyer, is not exempt and can require an offer if it brings control (POJK 9/POJK.04/2018, Article 23).
This article is general information about share-backed financing in Indonesia and is not legal, tax, or financial advice. A rights issue's timetable is set in the issuer's own announcements and prospectus, and the treatment of rights on pledged shares depends on the pledge documents and the custodian; confirm both with your Indonesian counsel.
