Launch of KE Retail Sukuk Announced
K-Electric (KE) is making history in Pakistan's corporate Sukuk landscape with the launch of its KE Retail Sukuk. This innovative financial product, set to open on August 4, 2022, will provide an attractive investment opportunity for individuals seeking high returns and tax advantages in debt capital markets.
The KE Retail Sukuk is designed to allow individual investors, including K-Electric’s residential, industrial, and commercial consumers, as well as high-net-worth individuals, to invest directly in the company’s financing. This was traditionally restricted to private placements and institutional investors.
A Shariah-Compliant Financial Structure
The KE Retail Sukuk is structured under the Shirkat-ul-Aqd model, an Islamic partnership-based financing arrangement that connects investors' returns directly to K-Electric’s core electricity distribution business. This sukuk has been rigorously reviewed and approved by three independent Shariah advisory boards—HBL Shariah Board, ASAS Shariah Advisory Services, and Mufti Ali Asghar—to ensure full compliance with Islamic law.
A Unique Bill Adjustment Option
One of the notable features of the KE Retail Sukuk is the option for investors who are also K-Electric consumers to have their monthly profits adjusted against their electricity bills, effectively integrating investment returns with utility payments and enhancing consumer engagement.
A Milestone in Pakistan's Sukuk Market
Historically, K-Electric has been a pioneer in Pakistan’s sukuk market, having previously issued rated, listed, and secured sukuks, including a PKR 6 billion issuance in 2014 and the largest listed long-term sukuk of PKR 25 billion in 2020. Since 2022, KE has issued 33 short-term privately placed sukuks for working capital requirements. However, the KE Retail Sukuk is the first product to open the market to retail investors formally on the Pakistan Stock Exchange (PSX) under the regulatory vision of the Securities and Exchange Commission of Pakistan (SECP) focused on broadening secondary capital market participation.
Encouraging Broader Participation
The introduction of the KE Retail Sukuk aims to encourage broader participation in the debt capital markets, offering a new avenue for investors. In the broader corporate Sukuk context, Pakistan’s sukuk market has been dominated by sovereign issuances, which constitute 91% of the market, whereas corporate sukuks total only 9%. The KE Retail Sukuk is expected to diversify and deepen the domestic Islamic finance market by expanding investor participation beyond institutional players to retail consumers, promoting financial inclusion and innovation in Pakistan’s capital markets.
Investors will receive their Sukuk profit through bank transfers, unless they opt for profit adjustment, making the process simple and convenient. Profits can be adjusted against electricity bills for K-Electric consumers, further enhancing the connection between investors and the company's core business operations.
The KE Retail Sukuk is a significant milestone in Pakistan's corporate Sukuk landscape, pioneering the retail segment and supporting the SECP and PSX’s goals of capital market development and innovation. The pre-IPO phase of PKR 1 billion for the KE Retail Sukuk has already been completed, and the IPO round will open on August 4, 2022, for individuals across Pakistan.
- The KE Retail Sukuk, designed to open on August 4, 2022, is an innovative financial product for individuals looking for high returns and tax advantages in debt capital markets, allowing them to invest directly in K-Electric’s financing.
- The KE Retail Sukuk is structured under the Shirkat-ul-Aqd model, a Shariah-Compliant financial structure that connects investors' returns directly to K-Electric’s core electricity distribution business.
- For investors who are also K-Electric consumers, there is an option to have their monthly profits adjusted against their electricity bills, integrating investment returns with utility payments and enhancing consumer engagement.
- The KE Retail Sukuk aims to encourage broader participation in Pakistan’s debt capital markets, offering a new avenue for investors to invest, diversify, and deepen the domestic Islamic finance market, promoting financial inclusion and innovation in Pakistan’s capital markets.
