Rs200 bn Energy Sukuk-II oversubscribed by 62.5pc on first day

ISLAMABAD: The Pakistan Energy Sukuk-II of Rs200 billion book-running that began on Monday in Pakistan Stock Exchange (PSX) attracted a strong demand and was oversubscribed by 62.5 percent at its first day, indicating that the government will discover low interest rate.

The book running process will also continue on Tuesday (today), a senior official told The News. Since, at the first day high interest of investors in government guaranteed sharia compliant securities was seen, they expect that over subscription can cross 100 percent.

According to market sources, the Rs200 billion debt instrument is over-subscribed by Rs125 billion, a high number of institutional investors have bid for the debt security. It is the first time that for a government guaranteed debt almost Rs40 billion is being bid by non-banks including a few retail investors.

The Power Holding Limited (PHL), a public sector entity fully owned by the Ministry of Energy issued these Sukuk aimed at addressing the liquidity constraints being faced by the country’s power sector.

The debt instrument, which is 100 percent Statutory Liquidity Requirement (SLR) eligible having a 10-year maturity with semi-annual profit payment for investors is the first ever debt issuance went on offer through PSX. This is the second issue of the energy Sukuk by PHL. In October last year, PSX listed Rs200billion Energy Sukuk-I. The government decided to issue the debt through the PSX to ensure transparency and competitive bidding. PSX offers a state of the art, book building mechanism which will be used to determine the cut-off spread in basis points over the six months Karachi interbank offered rate that the issuer will pay on semi-annual basis to successful investors. The total issue size will be offered through private placement to eligible investors, followed by a technical listing of the sukuk on PSX.

Unlike the Sukuk issuance by PHL last year, investors who can participate in this issue including banks, financial institutions, companies or corporate bodies, mutual funds, voluntary pension schemes, private funds being managed, insurance companies, securities brokers, funds and trusts, and individual investors having net assets of at least Rs2 million.

After the security is listed, investors throughout Pakistan and abroad can buy or sell units of the Sukuk on the PSX trading platform through their broker. This will provide liquidity and investors will be able to buy or sell the Sukuk in line with their investment objectives. In the long-run, having a larger investor base will help the government to successfully raise funds from the market at the most competitive rates.

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