Astra Mitra Ventura sets US$11.4mil target to fund SMEs, startups this year
By Masyitha Baziad September 16, 2016
- Lion's share of funds to SMEs whose core business is related to automotive manufacturing
- Astra is planning to push its SME partners into the online aftermarket
PUBLIC-listed diversified conglomerate Astra International Tbk, through its venture capital subsidiary Astra Mitra Ventura, is targeting to disburse up to US$11.4 million (Rp150 billion) to fund small- and medium-sized enterprises (SMEs) and startups in Indonesia this year.
Most of the funds will go to SMEs whose core business is related to automotive manufacturing, as it is the main revenue contributor to Astra International.
“As our business is mainly in automotive manufacturing and distribution, we are focusing on funding SMEs that have a connection to this,” said Astra International president director Prijono Sugiarto in Tangerang, West Java during a visit to one of the company's SMEs business partners.
“However our SMEs business partners also need to be exposed to the idea of using technology in their processes to produce good quality products that Astra will use, or which they can sell to other vendors,” he added.
According to Prijono, Astra Mitra Ventura does not merely provide capital, but also offers mentorship and knowledge sharing, This includes the introduction of new technology and automation processes to be deployed in the manufacturing process.
As a result, he said that there had been a significant decrease in defective products received from Astra Mitra Ventura’s SMEs business partner.
“The use of technology in manufacturing is very important as it increases productivity, lowers the cost burden, and results in good quality of products. We will continue to advocate this in the future,” Prijono explained.
Astra International began as a trading company in 1957. More than a decade later it was appointed as Toyota distributor in Indonesia. The company subsequently also became a Honda motorcycle distributor.
Ever since then, the company's business concerns have revolved around the automotive sector, including building assembly plants, running a components business and offering car financing services.
As of last year, the group had more than 225,000 employees working across 190 subsidiaries in six business segments namely, automotive, financial services, heavy equipment and mining, agribusiness, infrastructure and logistics, information technology.
In the first half of this year (1H16) the group’s net income declined 12% to Rp7.1 trillion (US$539.5 million), from Rp8.1 trillion (US$610.5 million) in the same period last year.
Almost 56% of the group’s net revenue comes from the automotive business, followed by heavy equipment and mining (25%), and financial services (10%).
Bringing tech to SMEs
Astra Mitra Venture is not rushing to invest in tech startups as it needs to first strengthen its core business by helping the SMEs that are also Astra’s manufacturing suppliers to stand on their own and grow.
“Our main weakness here in Indonesia is that many SME players are heavily dependent on projects. When Astra has a project, they will produce the parts, and that is it,
“This is not sustainable. What the SME players should do is have their own market access and continue manufacturing all year regardless of whether we give them a project or not,” Astra Mitra Ventura’s president director Jefri Rudyanto Sirait (pic, right) told the media.
The best way to ensure that SME players continue manufacturing is to have open market access for their products by leveraging on online marketplace and e-commerce.
Research firm Future Market Insights predicts that the automotive aftermarket industry's value will reach US$218.7 billion in 2025, including replacement, spare parts, accessories, and services.
The automotive aftermarket is a secondary market, which includes after-sale services, and the remanufacturing of all vehicle parts, equipment, and accessories. In the US, Amazon and eBay Motors are considered the biggest online aftermarket players.
“We are planning to push our SME partners into the online aftermarket so they have greater access and can even export to neighbouring countries,”
Astra Mitra Ventura has 100 SMEs and startups to fund in their pipeline, but are targeting to fund up to 20 this year.
In the pipeline
When asked about the potential investment in tech startups, Jefri said that the company is very open to investing in tech startups, as long as the startup has a business solution needed by either Astra as a group, or the SME business partners.
“For now, what we are trying to do with the funds is to promote technology deployment and automation in our SME business partners' processes, rather than invest in automation on our own, as that would be very expensive,” Jefri said.
“However looking at the direction now, technology is becoming the backbone of businesses. We will look to invest in tech startups with a commitment to create good products or solutions, especially if it is in the realm of automotive manufacturing,” he added.
Astra Mitra Ventura funds range from Rp100 million (US$7,787) to Rp25 billion (US$2 million). They have already disbursed Rp210 billion (US$16 million) to date, to 395 SMEs in Indonesia, bringing the average received by each SMEs to Rp531.6 million (US$40,341).
Jeffry ended by saying that Astra is now building what will be called Athe stra Digital Centre (ADC) in order to offer more technological and digital support to the group, its subsidiaries, and the SME business partner. However, he did not reveal when the ADC will begin functioning. said.
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