alltimeVenture

One year ago, precisely on February 16, 2023, Cottonindo Ariesta Tbk (IDX: KPAS), a cotton producer and the first modern facial cotton company in Indonesia, was officially declared bankrupt by the Panel of Judges of the Central Jakarta Commercial Court. This decision stemmed from KPAS’s inability to fulfill its debt repayment obligations to its suppliers.

According to KPAS’s last published financial report, namely the Q3 2021 financial report, the Company’s total liabilities amounted to IDR 114 billion, while its total current assets stood at only IDR 51 billion. Furthermore, in a disclosure by the CEO of Cottonindo Ariesta, it was revealed that the Company could no longer sustain its business activities due to a lack of working capital and difficulties in securing additional funds. Consequently, there is a high likelihood of permanent cessation of business operations in the future.

The current predicament faced by Cottonindo Ariesta starkly contrasts with its fortunes in 2006 when the company embarked on its global expansion through exhibitions and began exporting to various countries, including mainland China, Taiwan, Saudi Arabia, Russia, Malaysia, Thailand, Vietnam, South Africa, and Australia. Additionally, in 2018, the Company successfully executed an IPO to raise additional funds, which, as stated in its prospectus, were intended for business expansion.

So, what caused a company that initially seemed to have promising prospects to suddenly be declared bankrupt shortly after conducting an IPO?

How they got started and grew

Cottonindo commenced operations of its first modern facial cotton factory in 1995. At that time, modern facial cotton products were already present in the Indonesian market, but they were all imported from abroad. The decision to start producing facial cotton by Cottonindo was driven by the desire to offer products at a more affordable price compared to existing imports while maintaining good quality.