Engro to issue Rupiya Certificate again

Corporation also plans to float an Islamic bond of Rs3b before June.

KARACHI: Engro Corporation is planning to launch another Rs3 billion issue of its Rupiya Certificate in May, The Express Tribune has learnt from official sources.

“There is a plan to launch another issue for about Rs3 billion,” confirmed a company official. Encouraged by the response to the first offering of the certificates, the company had expressed interest in using the same avenue to raise more funds, in a report issued to stakeholders last month.

However, the company is awaiting clearance from the Securities and Exchange Commission of Pakistan (SECP). “A team of officials is in Islamabad deliberating with the regulator and we expect a decision on this front sometime next week,” said an official requesting anonymity.

The funds generated through this offer will be utilised to retire bridge financing for the newly inaugurated fertiliser plant, said BMA Capital Head of Research Hamad Aslam. Bridge financing is the additional cost associated with the plant due to delays in construction and commissioning.

Engro started a new fertiliser plant at Daharki, Sindh earlier this year, which can produce 1.3 million tons of urea.

The first offering of the Rupiya Certificate, launched on October 14, 2010, was so well received by retail investors that the company increased its issue from Rs2 billion to Rs4 billion. The augmented target was also completely subscribed days before the subscription deadline.

The additional Rs2 billion issued during that offer has been listed at the Karachi Stock Exchange to become the first commercial paper to be traded over the counter at the country’s premier bourse.

The payout schedule for the second certificate will be similar to the earlier one, said Aslam.

The first certificate offered profit payments at the rate of 14.5 per cent per annum every six months for a minimum amount of Rs25,000, invested for a period of three years.

The launch and marketing of Rupiya Certificate was an extensive exercise. Engro partnered with 15 distributors to set up 2,200 touch points to market the certificates.

While the success of this offering will lend confidence to other companies looking to raise capital, the expense and effort made presents a daunting task for most home-grown companies. Still market experts expect other companies to follow suit.

Sukuk launch

“Engro will also launch a Sukuk issue before June,” confirmed a company official. The Islamic equivalent of a commercial bond is expected to also raise Rs3 billion for the company. The official revealed that approvals for the public offering are currently being sought from SECP.

The expected Rs6 billion will take the corporation’s total debt to Rs99 billion.

Published in The Express Tribune, February 27^th, 2011.