* Govt confirms IPO price at 750 rupiah per share
* Govt cuts offering size to 6.3 bln shares
* To raise less than half hoped for after rich pricing
* Debut still seen attracting retail demand (Updates with details, quotes)
By Rieka Rahadiana and Fathiya Dahrul
JAKARTA, Jan 26 (Reuters) - National carrier PT Garuda Indonesia's initial public offering will raise $526 million, less than half the $1.1 billion targeted, though local investors see it attracting strong retail demand on its February debut.
Foreign investors were put off by pricing that valued Garuda far higher than regional peers, after the government intervened to push the initial range higher, and underlines reduced bullishness on Indonesian assets after a sell-off this month.
The government set the offer at 750 rupiah per share, the bottom of the 750-1,100 rupiah initial range, and reduced the offer to 6.3 billion shares from initial expectations for 9.362 billion, Pandu Djajanto, a deputy for privatisation at the state enterprises ministry, told Reuters.
Several institutional investors briefed by Garuda during a global roadshow found the pricing too rich, though some local instutitional investors said they still expected good retail demand to ensure a positive debut.
"I think at this price Garuda's stock will become a darling on its debut as local investors are very keen to get it," said Pardomuan Sihombing, head of research at PT Recapital Securities in Jakarta.
Foreign investors attracted to Indonesia's booming economy are wary of state interference and poor corporate governance 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.
Local underwriters were then left confused after state enterprise minister Mustafa Abubakar told a press conference on Wednesday that the offer would be only 5.735 billion shares, only for Djajanto to later confirm it was 6.3 billion to include a full sale of a 10.9 percent stake owned by state lender Bank Mandiri .
Garuda's 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.
The government may have moved to lift the price range after being 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.
Abubakar said the Garuda IPO was fully covered.
"We will participate as we expect some upside from locals, and retail buying will also be strong during its debut," said a Jakarta-based fund manager, who declined to be identified as he is not authorized to speak to the public.
The offering comes as Jakarta stocks have dipped 7 percent this year on fears the central bank is behind the curve in tackling inflation and as investors take profits from last year's 46 percent rally.
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's IPO raised less than Philippine budget carrier Cebu Air's $538 million in October last year.
"After building up investors' appetite for its IPO, it's disappointing to see Garuda falter at this critical stage," said Shukor Yusof, analyst for S&P based in Singapore.
"If the airline fails to get sufficient funds then its refleeting programme could be in jeopardy...This could all have been avoided if Garuda and those behind its planned listing had been more realistic about the airline's prospects." ($1 = 9036.5 Rupiah) (Additional reporting by Janeman Latul in JAKARTA and Harry Suhartono in SINGAPORE; Editing by Neil Chatterjee)