KARACHI: The federal government has raised record Rs 371 billion (over $1.29 billion) through the sale of government of Pakistan (GoP) Ijarah Sukuk.
This was the highest issuance of Sukuk in a single auction by the federal government since the start of GoP Ijarah Sukuk program in 2008. The underlying asset utilized for Sukuk issuance was Islamabad Expressway on which an Ijarah Sale and Lease Back transaction was performed.
The underlying Shariah Structure of the Sukuk was approved by Shariah Advisory Committee of State Bank of Pakistan while the transaction was led by Meezan Bank Limited alongside Dubai Islamic Bank Pakistan Limited and Bank Alfalah Limited as Joint Financial Advisor to the transaction.
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On 3rd of August 2023, various bank participated in the auction for investment in GOP Ijarah Sukuk. Some 6 denominations were open for bidding in the Sukuk which included 1-,3- and 5-year Fixed Rental Rate (FRR) Sukuk with a target of Rs 90 billion and 1-,3- and 5-year Variable Rental Rate (VRR) Sukuk of Rs 150 billion auction target.
The government was intended to raise a total of Rs 240 billion from this auction, however the Sukuk were oversubscribed by over 200 percent with total bids received equivalent to over Rs 508 billion. In term of dollar the submitted bids were worth approximately $1.77 billion.
On the basis of the announced cutoff rates, Sukuk equivalent to Rs 371 billion were issued under 5 denominations while all bids were rejected against the 5 Year FRR denomination.
Some Rs 100.346 billion were raised through the sale of 1-year VRR, Rs 2.161 billion against 1-year FRR and Rs 5 billion through 3-year VRR. The federal government also accepted bids worth Rs 195.25 billion for 5-year VRR and Rs 68.385 billion raised against the auction of 3-year FRR. The total accepted and borrowed amount was Rs 371.142 billion.
The rental rate against the above Sukuk varied from 18.49 percent per annum to 23.62 percent per annum depending on the tenure of the Sukuk. The rental payment is to be made on half yearly basis with Sukuk redemption at maturity.
Copyright Business Recorder, 2023
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