KARACHI: Treet Corporation Limited, a company that specialises in manufacturing good quality razors, has planned to issue capital-boosting Sukuk bonds with a perpetual tenor, the spokesman said on Thursday.
In its first entry in the Islamic debt capital market, the company plans to raise Rs.539 million in the form of perpetual and convertible instruments of redeemable capital, Treet Corporation said in a stock exchange filing.
“The major objective of the offer issue is to meet the working capital requirements of various business segments of the company and its sister companies, which form part of Treet Group of Companies” Rana Shakeel, Director Finance at Treet Corporation said.
The company has called a meeting on 31st March and it would pursue shareholders approval to raise the amount. The sukuk will be issued after approval of the related authorities, he also added.
Issuance of corporate sukuk is increasing, helping broaden country’s Islamic capital market, which in recent years has relied on the government for the major deals.
Last month the capital market regulator had also announced rules for the issuance of sukuk as part of efforts to strengthen governance and widen their appeal to investors. The current channel of sukuk includes K-Electric, Mobilink and Bank Islami. The Karachi Electric planned sukuk worth Rs22 billion would be the country’s largest sukuk to date.
Shakeel, Director Finance said the management is confident that planned financial scheme will reduce company’s conventional debts and financial risk resulting in increased profitability.
The sukuk will be listed on the local stock exchange and could be converted into ordinary shares. Shakeel said the issue would help removal of mark-up based debt with profit sharing for working capital and expansion requirements. “Convertible sukuk will reduce borrowing costs, annual financial charges, both in terms of interest payments and principal amount,” he added.
In addition to facilitating current expansion and working capital management, the sukuk issue would also promote broader based equity ownership and increase the free float of the company.
In contrast to the broader market, which closed 0.38% up, shares of Treet Corporation fell 1.30% following the press conference. The shares closed at Rs117.65 per share.
Sukuk, the Islamic bonds based on religious guidelines such as prohibition on interest and monetary conclusions, have gone mainstream over the years, as borrowers have sought to tap the country’s Islamic financial market’s huge cash pool.
Demand for sukuk is expected to stay solid because Islamic banks, unlike conventional peers, are stopped from interest-bearing securities. On the other hand, higher regulatory capital requirements have put them on the look-out for high-grade Islamic assets, says a banker.