Government issues largest Sukuk, raising Rs371 billion

Picture source - Reuters
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The highest issuance of Islamic bonds in a single auction since the Sukuk program’s start in 2008 raised a whopping amount of Rs371 billion, or over $1.29 billion, in the nation’s record sale of Ijarah Sukuk.

Strong demand from regional Islamic banks was sparked by the record yield.

Bankers claim that the government raised this sum on August 7 through the settlement of Sukuk. On August 3, several banks took part in the auction for investments in the Ijarah Sukuk issued by the Government of Pakistan.

There were six Sukuk denominations available for bidding, including one, three, and five-year fixed-rate and one, three, and five-year variable-rate Sukuk.

According to bankers, the Sukuks were oversubscribed by more than 200%, with total bids received amounting to about Rs508 billion (around $1.77 billion). The government had hoped to generate a total of Rs240 billion via the auctions.

Sukuk worth Rs371 billion were issued in five denominations based on the declared cutoff rates, while all bids for the denomination with a five-year fixed rate were turned down.

Depending on the length of the Sukuk, the rental rate against the above Sukuk ranged from 18.49% to 23.62% annually. A half-yearly rental payment is required, and the Sukuk is redeemable when it reaches maturity.

Islamabad Motorway served as the underlying asset for the Sukuk issuance, and an Ijarah Sale and Lease Back transaction was completed on it.

Meezan Bank Limited, Dubai Islamic Bank Pakistan Limited, and Bank Alfalah Limited served as the transaction’s joint financial advisors, and the Shariah Advisory Committee of the State Bank of Pakistan approved the Sukuk’s underlying Shariah Structure.