First Rs200bn sukuk issue launched via stock market

Updated 18 Apr 2020

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The amount generated from it will be used for the settlement of partial circular debt related to the power sector.  — Dawn/File
The amount generated from it will be used for the settlement of partial circular debt related to the power sector. — Dawn/File

ISLAMABAD: For the first time the government has floated debt of a state-owned entity (SoE) — earlier the exclusive domain of the banks — for ordinary investors through the stock market.

The state-owned Power Holding Ltd (PHL) on Friday announced the 10-year Sharia-compliant sukuk up to Rs200 billion through the Pakistan Stock Exchange.

The amount generated from the Pakistan Energy Sukuk-II (PES-II) will also be used for the settlement of partial circular debt related to the power sector.

For the first time, bonds will be issued through the book-building mechanism. Most importantly, ordinary investors have been allowed to participate in buying a government security. Apart from the banking sector, other eligible investors include mutual funds, voluntary pension schemes and private fund being managed by the NBFC, insurance companies, stock brokers, fund and trust as defined in the Employees Contributory funds, and even individual investors having net assets of at least Rs2 million.

The value of each sukuk unit is placed at Rs5,000. The minimum bid size would be 20 units or Rs100,000.

A senior official of the Ministry of Finance said the move would eventually enhance the role of capital market in the country. The stock brokers have even been allowed to place these bonds issued by the energy ministry as eligible margins, he added.

Meanwhile, in another development, the SECP has relaxed the time for maturity requirement of government Ijara Sukuk for Sharia-complaint money market sub funds of Pension Fund.

The SECP has allowed the Sharia-compliant pension funds to invest in government sukuk from three to five years.

The move has been made considering the challenges faced by the Islamic Pension Funds in terms of liquidity management due to shortage of viable investment avenues available for Sharia compliant pension funds.

Published in Dawn, April 18th, 2020