KARACHI:The government has saved Rs573 million in rental cost (cut-off yield) as it raised Rs30 billion in the maiden auction of one-year Ijarah Sukuk at the Pakistan Stock Exchange (PSX) at a fixed rental payment of 19.52%.
This rental cost is 1.91 percentage points lower than the 21.43% rate of return paid to investors, mostly by conventional banks, on the purchase of one-year conventional bonds, called T-bills, in an auction held by the State Bank of Pakistan (SBP) on November 29, 2023.
The rental payment on Ijarah Sukuk is also 91 basis points lower than the variable rental payment (floating rate of return) based Sukuk that Shariah-compliant banks bought at “T (T-bill) minus one percentage point” from the SBP last week, it has been learnt.
The Ijarah Sukuk auction has ended the monopoly of financial institutions in the bond market, as it facilitated the common man to directly bid for the Shariah-compliant bond with a minimum investment of Rs5,000.
PSX said in a notification on Saturday that investors bid for Sukuk at the rental payment ranging from 18.50% to 33.43%. The Ministry of Finance, however, raised the targeted amount of Rs30 billion at a rental coupon of 19.52%.
The stock market received bids of Rs396 billion from investors, oversubscribing the issue by 13 times. When compared with face value, it was oversubscribed by 16 times with investors offering Rs479 billion to buy the Sukuk.
The government has sold the Sukuk by keeping Islamabad Metro as the underlying asset.
There are also plans to auction conventional papers including T-bills and Pakistan Investment Bonds (PIBs) through the PSX in the near future and make auctions a regular feature at the bourse.
Talking to The Express Tribune, adviser to the issue Meezan Bank Senior Executive Vice President and Head of Shariah Compliance Ahmed Ali Siddiqui said the interest shown by a large number of investors having huge liquidity in hand helped the government acquire financing at a comparatively lower rental payment.
“It is a landmark achievement to raise investment through the stock market,” he remarked.
Siddiqui hoped that the rental payment rate may come down further in future auctions, as more people became aware of being eligible to participate in auctions. PSX will float the next Sukuk in January 2024.
