Financial Institutions Class Presentation

Sukuk ul Shirkah
Presented to Presented By
Muhammad Arsalan Rohail Rasool - 18874
Syed Ibrahim - 14580
Rizwan Afzal - 17970
Definition
Sukuk is the Arabic name for a financial
certificate, Islamic alternative to
conventional bonds, Sukuk is a trust
certificate in which investor returns are
derived from legal or beneficial ownership
of assets.
Dealing in Bonds is not permissible
according to Shariah.

They represent a portion of Debt payable

by the issuer. Earning any kind of profit
falls under the category of RIBA (Charged
Interest) as defined in the Hadith

Every loan that draws any premium is Riba.

 Sukuks are developed as alternative to Bonds.

A Sukuk represents proportionate actual or

beneficial ownership in an asset or a pool of
identified assets.

For a defined period the Risk and Return associated

with such assets belongs to Sukuk holders which
makes their return permissible for the holder.

Trade of such Sukuks is permissible, because it will

be equivalent to the sale/ purchase of holders
proportionate share in the assets.
Sukuk versus Conventional
Bonds
Sukuk Conventional Bonds
1. Income is generated 1. Income is derived
from assets from debt
instrument.
2. Return is expected
2. Return is interest and
3. Negotiability is pre-determined.
restricted to specific
types of Sukuk 3. Negotiable financial
paper
Sukuk versus Conventional
Bonds
Sukuk
4. Sukuk issuer is a seller
of assets
5. Sukuk holder is an
owner of assets
6. Seller-Buyer
relationship
7. Business risk-return
relationship
Conventional Bonds
4. Bond issuer is a
borrower
5. Bond holder is a
lender
6. Lender-borrower
relationship
7. Issuer guarantees the
payment of face value
and periodic interest
Sukuk versus Conventional
Bonds
Sukuk Conventional Bonds
8. Major risk lays with 8. Major risk is with
underlying assets issuer credit risk

9. Return is expected 9. Interest payment is

from the underlying an obligation
assets
10. Issuer is obligated to
10. Return of investors return investors
capital cannot be capital (face value)
guaranteed
 K- Electric Sukuk Introduction
Type: Issue Date:
Musharakah 29 May 2015

Issue Size: Maturity:

Rs.22 billion 29 May 2022

Currency: Sukuk Rating:

PKR AA+ by JCR-VIS, and A+ Islamic
International Rating Agency
Denomination of (Bahrain)
Sukuk
Rs.5000 Exchanges:
Karachi Stock Exchange
Tenor: 7 Years
Arrangers:
Country: Pakistan Habib Bank & Meezan Bank
What is K-electrics Sukuk-ul-Shirkah ?

Sukuk-ul-Shirkah is K-Electrics second retail-listed issue based

on diminishing Musharaka, after K-Electrics AZM Sukuk

The Sukuk offers returns on a 3-Monthly (quarterly) basis for a

period of 7 years at a floating rate of 3M KIBOR (plus 100 BPS per
annum even on an investment of as low as PKR 10000/-

The IPO portion was PKR 7 Billion (inclusive of green shoe option
of PKR 2 Billion)

Sukuk Issue or Total issue size: Up to PKR 22 Billion

Investment Agent: Pak brunei investment company

A Musharakah arrangement is a partnership arrangement established by the co-owner (K-

electric) and the investment agency whereby each party has undivided joint ownership of the
Musharakah Assets pursuant to a Musharakah agreement
The Sukuk has also been approved by a transaction
Shariah advisory board, comprising of the following
scholars;

Professor Mufti Muneeb ur Rehman

Dr. Muhammad Imran Ashraf Usmani
Mufti Muhammad Yahya Asim
Mufti Irshad Ahmed Aijaz

Sukuk-ul-Shirkah is a safe investment and enjoys a high

investment credit rating of AA+ by JCR-VIS Credit
Rating Agency Limited and Islamic International Rating
Agency Bahrain.
How will KE use the Investment?

Funds generated from this Sukuk will be utilized to prepay

certain long-term financing facilities availed by KE and to meet
the permanent working capital expenditure financing
requirements of the company

How to invest in Sukuk-ul-Shirkah?

Sukuk-ul-Shirkah was being offered to the general public and

institutions however the first 15 days were only for individuals
and non resident Pakistanis to invest. The allotment of the
Sukuk was made on a first come, first served basis and it was
announced that applications will not be accepted once the
target amount of PKR 7 Billion (inclusive of green shoe option of
PKR 2 Billion) has been subscribed.
The Redemption Schedule of Sukuk of an
aggregate face value of PKR 10,000/- based
on 3M KIBOR (8% as of April 14,2015) plus
100 bps per annum for Sukuk, is set out in
the table below: (only for Calculation
purposes).
Months Musharaka Indicative Zakat W.H.T Total Musharaka
Investment Profit Payment Investment
Redemption Outstanding
3 - 300 - 30 270 10000
6 - 225 - 22.5 202.5 10000
9 - 225 - 22.5 202.5 10000
12 225 - 22.5 202.5 10000
15 225 - 22.5 202.5 10000
18 225 - 22.5 202.5 10000
21 225 - 22.5 202.5 10000
24 225 - 22.5 202.5 10000
27 500 225 12.5 22.5 690 9500
30 500 213.75 12.5 21.38 679.88 9000
33 500 202.5 12.5 20.25 659.63 8500
36 500 191.25 12.5 19.13 649.5 8000
39 500 180 12.5 18 639.38 7500
42 500 168.75 12.5 16.88 629.25 7000
45 500 157.5 12.5 15.75 619.13 6500
48 500 146.25 12.5 14.63 609 6000
51 500 135 12.5 13.5 598.88 5500
54 500 123.75 12.5 12.38 588.75 5000
57 500 112.5 12.5 11.25 588.75 4500
60 500 101.25 12.5 10.13 578.63 4000
63 500 90 12.5 9 568.5 3500
66 500 78.75 12.5 7.88 558.38 3000
69 500 67.5 12.5 6.75 548.25 2500
72 500 56.25 12.5 5.63 538.13 2000
75 500 45 12.5 4.5 528 1500
78 500 33.75 12.5 3.38 517.88 1000
81 500 22.5 12.5 2.25 507.75 500
84 500 11.25 12.5 1.13 497.63 -
10,000 4462.5 250 446.25 13766.25
 Sukuk Based on Diminishing Musharaka
. KE Issuer
Musharaka Share 25%

1 Sale of carved out company assets through an asset purchase agreement on deferred
payment basis.

2 Proportionate ownership of the assets will transfer to the investment agent acting on
behalf of the Sukuk holders.

3 Execution of rental payment agreement for carved out assets.

Investment Agent (on behalf of Sukuk Holders)

Musharaka Share 25%
4 Sukuk subscription period commence.

5 Payment for the purchase of Sukuk by investors through Pre-IPO and IPO.

6 Payment for purchase of assets through Pre IPO funds and sunsequent subscription
proceeds of IPO.

7 Issuance of Sukuk commences.

8 Rental Payment (coupon).

9 Coupon (Rental) payment.

10 KE will purchase investment agents share (Sukuk Holders Share) in the

assets at buyout price as per purchase undertaking.

11 After the end of the grace period, the investment agent makes periodic
payments to redeem Sukuk units by selling its share in the Musharakah asset to
the issuer.

Can a investor withdraw his investment from Sukuk-ul-Shirkah at

any time?

No, there is no early redemption option available for the investors.

This Sukuk will be listed on Karachi Stock Exchange Limited which
will act as a provider of liquidity for the Sukuk by facilitating
secondary market trades