* Govt sets Garuda IPO price at 750 rupiah per share-sources
* Govt cuts offering size to about 6.3 bln shares-sources
* Garuda set to raise around $520 mln in IPO - sources (Updates with details, qoutes)
By Janeman Latul
JAKARTA, Jan 25 (Reuters) - National carrier PT Garuda Indonesia's IPO looks set to raise $520 million after being priced at the bottom of the range due to limited enthusiasm from investors, sources said on Tuesday, but the government delayed the final announcement of the plan.
The government is likely set the offer at 750 rupiah per share and cut it to about 6.3 billion shares from an expected 9.362 billion, because of weak demand even at the bottom of the 750-1,100 rupiah initial range, said four sources who declined to be identified because the details were not public.
Foreign investors were scared away by the offer's rich pricing, after the government intervened to push the initial range higher, leaving Garuda's hopes for a high-flying $1.1 billion IPO failing to get off the ground, sources said.
But with the final announcement unexpectedly delayed to Wednesday, there remained the chance that the government could again seek a higher price despite the widespread view the offering is poor value.
"We will try at 750 rupiah a share but the ministry is too chicken to announce it now, as it is worried that it will get criticised from selling it too cheap just like the Krakatau IPO last year," said one of the sources with knowledge of the deal.
The government was accused by some critics of selling off assets cheaply last year when the IPO for Krakatau Steel was heavily oversubscribed after being priced at the bottom of the range.
After a surge in interest in Southeast Asia's largest economy last year and a recovery in the global airline industry, appetite for the Garuda deal has sharply fallen.
Several local and foreign institutional investors briefed by Garuda during a global roadshow over the past two weeks snorted at pricing that valued the firm far higher than more successful regional competitors.
"We did look at it, but didn't participate and for reasons you already know," said a fund manager who asked not to be identified. "If I reveal those, I will be refused entry into Indonesia on my next trip."
Investors attracted to Indonesia's booming economy are wary of state interference in a country where some of the biggest enterprises are owned by the government, giving them big advantages over private firms.
Garuda's IPO has already involved the highest levels of power, with President Susilo Bambang Yudhoyono and his top advisers consulted when airline and privatisation officials went against the advice of the book valuers' suggested range of 560-850 rupiah, sources close to the deal said.
Garuda's likely IPO price reflects 7.4 times its Enterprise Value (EV) to EBITDA, which is higher than regional peers such as Singapore Airlines with an EV to EBITDA at 4.8 times, and Thai Airways at 4.9 times, according to data from Thomson Reuters' Starmine.
Citigroup and UBS are joint bookrunners on the deal.
The offering comes as Jakarta stock exchange has dipped 7 percent this year due to concerns over rising inflation and fears the central bank, which has kept benchmark interest rates at a record low of 6.5 percent for over 18 months, is behind the curve.
That said, it comes after a year in which Indonesia has been a darling of emerging market investors who have poured billions into equities and bonds, attracted by returns and yields that developed economies can only dream of.
Garuda's IPO is the first of a slew of state enterprises due for flotation this year and will also be closely watched by flag carrier Vietnam Airlines, which is planning to go public this year.
Garuda, founded in 1949, has flown into difficulty in recent years and only last year was allowed to resume flights to European Union countries after being banned because of concerns over safety standards following a spate of accidents.
It also experienced significant debt problems, converting loans from leading state lender PT Bank Mandiri into a 10.6 percent stake in the carrier. This will be sold off for 1.4 trillion rupiah in the IPO, one of the sources said. ($1 = 9063 Rupiah) (Additional reporting by Daniel Stanton and Saeed Azhar in Singapore; Editing by Neil Chatterjee and Andrew Marshall)