TFCs grow by Rs 11.6 billion

The Corporate Debt Market, known as Term Finance Certificates (TFCs) in Pakistan, grew by Rs 11.6 billion in FY07. The corporate debt market saw 10 new listed issues during the outgoing fiscal year and total size of these new listed bonds were Rs 11.65 billion as compared to last year, 9 TFCs worth Rs 10.4 billion were issued.
Total outstanding market of TFCs in Pakistan has reached Rs 50 billion. The rate of return on these TFCs was 1.50 percent to 2.75 percent over six-month KIBOR while three TFCs were issued by the commercial banks.
Muhammad Imran Khan, senior analyst at First Capital Equities Limited said that as per the date of June 09, 2007 listed TFC market was only 2.2 percent of total commercial banks' advances. "As compared the TFC market with KSE then it represents only 1.3 percent of total market capitalisation", he added. Private sector credit penetration in Pakistan is 28 percent of the GDP while corporate debt market is only 0.6 percent of the GDP.
"We feel that ample room for the growth of TFCs market as the corporate debt market is at infancy stage in Pakistan", he said and added "Moreover, as per our analysis during the FY05, 14 TFCs were issued, out of which 7 were issued by commercial banks". Similarly in FY06 out of 9 TFCs, 3 were of banks.
He said that this trend continued in FY07 where out of 10 TFCs, banks issued 3 TFCs. He said it is expected that, in FY08, banks would continue to issue TFCs. As these TFCs count in tier 2 capital of the bank for the purpose of capital adequacy and the banks which are facing problem in maintaining capital adequacy about 8 percent (prudential requirement) are likely to issue TFCs.
It is worth mentioning here that though three new companies viz. Faysal Bank Limited, First National Equities and Shahmurad Sugar Mills have planned to float their TFCs but the analysts believe that these are unlikely to conclude in the current fiscal year. Thus these were not included in this report however Orix Leasing's TFC is included in this report as it just required a formal listing.
The TFCs issued during the FY07 are including First National Invest Bank Limited issued on July 2006 worth Rs 500 million, United Bank Limited III issued on September 08, 2006 worth Rs 2,000 million, Jahangir Siddiqui & Company Limited IV issued on November 21, 2006 worth Rs 1,100 million, Worldcal Telecom Limited issued on November 28, 2006 worth Rs 350 million, Allied Bank Limited issued on December 06, 2006 worth Rs 2,500 million, JS ABAMCO Limited (A type) issued on January 17, 2007 worth Rs 550 million, JS ABAMCO Limited (B type) issued on January 17, 2007 worth Rs 150 million, Bank Al Habib Limited II issued on February 07, 2007 worth Rs 1,500 million, Escorts Investment Bank Limited issued on March 15, 2007 worth Rs 500 million and Orix Lease Pakistan Limited issued on May 25, 2007 worth Rs 2,500 million.