Ijarah Sukuk auction surpasses target, raises Rs12.7 billion

KARACHI: The government has raised Rs12.732 billion from the auction of Ijarah Sukuk bonds, exceeding its target by over 27 percent, the Pakistan Stock Exchange (PSX) said on Monday.

The auction, which included one-year fixed-rate discounted (FRD) Sukuk, attracted bids worth Rs23.7 billion, reflecting robust investor interest.

The PSX conducted the auctions for the sale of fixed-rate discounted, variable rental rate (VRR), and fixed rental rate (FRR) Government of Pakistan Ijarah Sukuk (GIS).

The government had set one-year fixed-rate discounted (FRD) Ijarah Sukuk auction target of Rs10 billion.

A total of Rs15.3 billion—of which Rs15.12 billion came from competitive bids and the remaining amount of Rs184.88 million from non-competitive bids—was approved from the total bids received for the one-year GIS FRD.

The bond in question had a cut-off price of Rs83.205, or a 20.24 percent rental yield.In contrast to conventional interest-based Treasury bills and Pakistan Investment Bonds, bankers stated that the government is diversifying its funding sources and reducing considerable debt costs with the successful issuance of Sukuk through the local bourse.

Along with this, there appears to be a shift towards Shariah-compliant financing after the Federal Shariat Court's directive to remove Riba/interest from the financial system by December 2027.

The government picked a total of Rs9.68 billion for the GIS VRR; Rs6.6 million was raised through the sale of three-year GIS VRR, and Rs9.67 billion was raised through the sale of five-year GIS VRR.

Out of the total amount of Rs9.68 billion, Rs9.65 billion was approved through competitive bids, while the remaining Rs25.35 million was approved by non-competitive bids under the relevant GIS bond category.

For the GIS three-year VRR, the cutoff price was Rs100, while for the five-year VRR bond, it was Rs98.37.

Additionally, the three-year FRR Sukuk raised Rs425.42 million for the government, but the five-year FRR bond bids were rejected by the government.In the latest auction, the three-year FRR bond was sold at a cut-off price of Rs100.12.