Sub se bara Rupiya

Being the first does have its advantages. Be it a new product, new service, or, as in the case of Engro Corp, new means of financing.
Breaking the ice in the corporate debt market of Pakistan, the company received a phenomenal response to the Engro Rupiya Certificate, the first corporate debt instrument targeting retail investors in the country.
Analysts and fund managers had been apprehensive about the prospects of the issue, but the overwhelming response had largely quelled all qualms, and also encouraged Engro to ponder over another similar issue in the very near future.
With an estimated Rs3 billion to be raised via the upcoming issue, which is expected to be launched in the second quarter this calendar year, the terms and conditions are to be the same as the previous issue.
The previous issue paid investors a return of 14.5 percent, which provided a cheaper rate of financing to the company. In an earlier interview with BR Research, the SBP governor had said, "Engro is borrowing from the public at a cheaper rate than the government is borrowing for commodity finance from the commercial banks."
This time, Engro enjoys an even better position since the successful sale of the first Rupiya issue has established its repute and also created massive awareness for the product amongst retail investors.
While the marketing costs for the previous issue had been set at Rs200 million - 5 percent of the total amount raised - it is likely to be smaller this time, both because of increased investor awareness and also because the amount to be raised is lower. Thus, financing costs will be even lower for the company for the Rs3 billion issue than the last time.
There are three major factors that have buoyed up response to Engros Rupiya certificate: firstly, the remarkable reputation of the company, both amongst the common populace, which constitute the bulk of the retail investors, as well as amongst some institutional investors.
Secondly, the relative naivety of retail investors towards corporate debt instruments, which makes them look at the offering from a more rose-tinted lens than a savvier investor. Here, Engros first-mover advantage is at play.
Finally, theres the great marketing prowess of the company which has had an effect on both the factors mentioned above.
Rupiyas main competitors are the National Saving Schemes (NSS), particularly the Special Savings Certificates and Defence Savings Certificates, which can be invested in with a smaller amount, without any withholding tax up to an investment of Rs150,000. The return on these instruments is less than 14 percent, which seems justified given the lower-risk associated with these instruments.
Yet, Rupiyas real competence lies in its investor concentration as over 90 percent of the certificates subscribers are believed to be retail investors, while the NSS are believed to have a significant concentration of institutional investors.
Engros step will also encourage other companies to venture into corporate debt instruments, and thus, a great foundation stone for Pakistans corporate bond market. Kudos, Engro!