Post COVID-19 Optimal Capital Structure for Indonesian Retail Company

Abstract

The COVID-19 pandemic that occurs in the world has a negative impact on the economy and makes various businesses make adjustments to their business. This also has an impact on PT MDS. By the end of 2021, economic conditions have improved and businesses are preparing to re-develop their businesses. PT MDS, which had previously closed several of its outlets, is preparing to reopen 12-15 outlets per year. The opening of new outlets carried out by the company is aimed at developing the business. However, the company also wants its implementation to continue to optimize the company’s efficiency. The way that can be taken in achieving optimization of company efficiency is through an optimal capital structure. To obtain the optimal value of the capital structure, this research conducts a scenario formation based on the company’s historical parameters. From the formation of the scenario, 3 scenarios can be formed, namely best-scenario, base-scenario and worst-scenario. The result of the analysis of the company’s optimal capital structure at base scenario is 85%, higher than the actual at 73.4%. Meanwhile, in best and worst scenario, the company’s optimal capital structure is at a lower and higher than actual condition. To achieve the optimal capital structure, companies need to increase their debt ratio. Using the Aswath Damodaran framework, it was found that the step the company needs to take is to carry out the project of opening 12-15 stores using new long-term debts.