Chapter 3

Figures converted from Indonesian rupiah at historical FX rates — see data/company.json.fx_rates. Ratios, margins, and multiples are unitless and unchanged.

What the state owes Erajaya

The second-largest asset Erajaya owns is money the Indonesian tax office is holding: $193 million of estimated claims for tax refund at 30 June 2026, plus $107 million of prepaid taxes [1]. Together that is 57.6% of equity attributable to owners [2] and 88.7% of the company's market value. The multi-year record shows the claims come back at close to face value — and that they have never come back fast enough to stop the pile growing.

Erajaya imports. Indonesian Article 22 withholding tax is levied on the value of goods crossing the border, not on the profit earned selling them, and a distributor whose parent-company taxable income is a thin slice of import value will overpay every year by construction. In 2025 the parent credited $99.3 million of Article 22 tax against a current tax charge of $9.1 million — it prepaid 10.9 times what it owed — and booked a $93.0 million refund claim for the year [3]. In 2024 the ratio was 19.6 times: $87.6 million credited against $4.5 million charged [4]. This is not a one-off dispute or a contested assessment. It is the arithmetic of the business model meeting the arithmetic of the tax code.

Sources: estimated claims for tax refund and prepaid taxes per the consolidated statement of financial position at 30 June 2026 [5] and equity attributable to owners of the Parent Company [6]; interest equivalent derived at the midpoint of the 6.50%-7.25% Rupiah bank-loan rates disclosed for 2025 [7]; market value of $339 million on 15,950,000,000 shares.

How the balance grew

The pile was not always this size. In the IPO offering memorandum, consolidated estimated claims for tax refund were $2.2 million at 31 December 2008, $3.3 million at 31 December 2010 and $3.3 million at 30 June 2011 [8]. Against the $193 million carried today, claims were then a rounding error.

Sources: estimated claims for tax refund, current and non-current, per the consolidated statements of financial position, FY2022 Annual Report [9], FY2023 Annual Report [10], FY2025 Annual Report [11] and the 30 June 2026 interim statements [12].

The step change happened in one year. The balance was $83.4 million at the end of 2022 and $125.8 million at the end of 2023 [13]. It reached $225.6 million at the end of 2024 and has sat near that level since [14]. The vintage tables explain it: at the end of 2023 the parent carried one year's claim, the 2023 vintage of $83.0 million [15]. At the end of 2024 it carried two, the 2023 vintage of $79.1 million and the 2024 vintage of $86.8 million [16]. Nothing was written off; the recovery cycle simply lengthened by a year, and two years of claims have been outstanding at every balance sheet date since.

One reading of the June 2026 balance sheet deserves correcting. Almost the whole block — $192.5 million of $193.2 million — sits in non-current assets [17]. That is not a new judgement about collectability. It is the normal state: 99.7% of the estimated claims were non-current at 31 December 2022 and 98.5% at 31 December 2023 [18] [19]. A claim becomes current only once the tax office issues its assessment letter, and those letters arrived on 12 December 2024 and 11 December 2025 — which is why the two most recent December balance sheets showed a current chunk and the June one does not [20].

The collection record

On the evidence in the filings, this is a good receivable. The tax office has assessed the parent's last two claims within a whisker of what was claimed, and the money has followed.

Sources: Note 31 Taxation, tax assessment letters received by the Company and its subsidiaries, 30 June 2026 interim statements [21] [22]; FY2025 Annual Report Note 31 [23]. Parent claim-year timing derived from the vintage tables.

The parent claimed $83.0 million for fiscal 2023 and was assessed $82.9 million — a shortfall of $95,000, or 0.114%, charged to income tax expense [24]. For fiscal 2024 it claimed $86.74 million and was assessed $86.73 million, a shortfall of about $1,900 on $87 million [25]. Once assessed, subsidiaries were paid in one to two months: TAM's $25.1 million was assessed on 24 June 2025 and paid on 21 July 2025 [26]. Older vintages clear too — the subsidiaries' 2022 vintage came off the table during 2024, leaving a $1.3 million tail of 2020 and 2021 claims behind it [27].

The one contested case cuts the other way and should be named. Subsidiary SES claimed a $1.30 million refund for fiscal 2024 and instead received an underpayment assessment of $5,400; it lodged an objection with the Directorate General of Taxes on 19 May 2026 and had no decision as at the reporting date [28]. That is a claim rejected in full. It is also $1.3 million — 0.6% of the block. A pattern of denials on that scale would matter; a single one at this size does not.

Money out, money in

What the balance does not do is shrink. The parent's claim for a year is settled roughly two years after the withholding is paid, by which time one or two further years have accrued behind it.

Sources: estimated claims for tax refund arising per year from the Note 30/31 vintage tables, FY2022 Annual Report [29], FY2023 Annual Report [30], FY2024 Annual Report [31], FY2025 Annual Report [32] and the 30 June 2026 interim statements [33]; refunds collected derived as the year-on-year fall in each vintage.

Two periods stand out. In 2024 the parent collected nothing: its 2023 vintage went from $79.2 million to $79.1 million over the year, and the $93,000 difference was the assessment shortfall booked to tax expense, not cash [34] [35]. That is the year the block doubled. In the first half of 2026 the opposite happened and the block still barely moved: $76.9 million of the 2024 vintage came back, while a new 2026 claim of $71.8 million accrued in the same six months, leaving the consolidated balance down $6.3 million at $193.2 million [36].

Six months of 2026 generated 84% of a full 2025's claim. If the second half accrues at the same rate, the 2026 vintage lands near $143 million against $93 million for 2025, and the block moves above $220 million before the 2025 vintage is collected. Growth in imports is what feeds it, so the balance scales with sales rather than mean-reverting.

This also makes the cash tax line hard to read on its own. Income taxes paid were $128.2 million in 2024 and $35.5 million in 2025 [37], then $42.3 million in the first half of 2025 against $12.0 million in the first half of 2026 [38]. Those swings track when refunds landed, not whether the withholding slowed.

What the float costs

At 30 June 2026 the group carried $338.7 million of interest-bearing bank loans excluding leases against $72.2 million of cash [39] [40]. The refund claims alone equal 57% of that debt; add the $107.1 million of prepaid taxes and the tax authorities hold the equivalent of 89% of everything Erajaya has borrowed [41].

Rupiah bank facilities carried 6.50% to 7.25% during 2025 [42]. Applying that band to the $193.2 million of claims gives $12.6 million to $14.0 million a year of interest that would not be paid if the money were in the bank — against $71.8 million of profit attributable to owners in 2025 [43], and against $31.6 million of group interest expense before lease interest [44]. Roughly a fifth of what the owners earn, and close to half the group's interest bill, is the price of a two-year interest-free loan to the state. No interest compensation on the refunds appears anywhere in the filings.

The same fact shows up in the return on equity. Profit attributable to owners of $71.8 million on $548.5 million of owners' equity at the end of 2025 is 13.1% [45] [46]. Measured against the $330.8 million of equity left after setting the refund claims aside, it is 21.7%. The trading business earns a respectable return; a third of the capital behind it is parked. That decomposition is illustrative rather than exact — the block is funded by a mix of debt, payables and equity, not by equity alone — but it locates where the shortfall between a 13% return and a 22% one comes from.

What a haircut would actually do

For an investor buying at 0.65 times book, what matters is how much of that discount is protection against the block being worth less than stated. Not much of it, on this arithmetic: the block would have to be badly wrong before the multiple stopped looking low.

Source: derived from equity attributable to owners of $521.4 million and 15,950,000,000 shares at 30 June 2026 [47], applying stated write-downs to the $193.2 million of refund claims [48].

Writing off a quarter of the block takes price-to-book from 0.65 to 0.72. Writing off the whole of it — against an observed assessment record of 0.114% and 0.002% shortfalls — takes it to 1.03. The credit question, on the evidence available, is close to settled; the discount to book is not compensation for it.

The read this chapter supports is that the refund claims are a duration problem, not a solvency or accounting one. They convert at par, on a cycle of roughly two years, and they grow with imports — which means they consume cash permanently while the business expands and would release $193 million, more than half the market value, only if growth stopped or the withholding mechanism changed. The strongest fact against that read is the SES objection: one subsidiary claim was denied in full and remains unresolved, and if that becomes a pattern rather than an exception the credit assumption underneath everything above weakens. Three things in the next two filings would settle it. Whether the 2025 vintage of $93.0 million receives its assessment letter around December 2026, which would confirm the two-year cycle rather than a lengthening one. Whether the 2026 vintage annualises near $143 million, which would push the block past $220 million. And how the Directorate General of Taxes rules on the SES objection.

The cash that never reaches owners in this business is not lost to weak margins alone — a meaningful share of it is on deposit with the Indonesian tax office, earning nothing, and financed at 7%.