We laud efforts of Steering Committee on Promotion of Islamic Banking formed by Honourable Mr Muhammad Ishaq Dar, Finance Minister. The Committee was headed by Mr Saeed Ahmed, Deputy Governor State Bank of Pakistan. The Committee took this task as challenge and utilised their utmost capabilities to frame out the strategies. Alhamdu Lillah after paramount endeavours of Steering Committee a comprehensive frame work has been geared up and handed over to the Finance Ministry for further implementation. Almighty ALLAH may shower his countless blessing to the elements, contributed for this great cause.
SITARA CHEMICALS AND ISLAMIC FINANCING HISTORY
Sitara Chemicals has a proven track record of sharing very attractive rate of return on its past Islamic debt instruments, unlisted and listed, based on profit and loss sharing arrangement. It is important to mention here that every time the Company issued its above mentioned Islamic instruments the conventional banking interest rate environment was in borrowers favour and Sitara Chemicals had the opportunity to raise finances on a very competitive rate of interest but the Company decided to commit itself for promoting Islamic Financing in Pakistan as a role model. Besides, its principal stand of promoting Islamic Finance Sitara Chemicals has shared with Islamic debt investors its profits without comprising on true Musharakah principles. This fact is evident from the level of rate of return offered by the Company on its earlier Islamic debt issues. Here are some historic Islamic transactions which were closed successfully.
MTFC ISSUE OF RS. 150 MILLION Sitara Chemicals used to strive for many years to get out of conventional interest - based Financial arrangements. The company issued Musharakah term Finance certificates (MTFCs) at the end of 1999, and the proceeds were used to repay the single interest-based long-term facility then outstanding, which was otherwise repayable in instalments by the end of year 2007. Since the first issue of MTFCs, the sponsors of the company have achieved complete Islamization of their Financial dealings.
MTFC holders were entitled to a very lucrative two level share in the profits and loss of chemical division of the company. Total return on profit and loss ranged from 16% to 32%.
In order to mitigate risk of loss to the MTFC holders a shariah compliant takaful arrangement was made to which the company contributed its shares of Rs 40 million.
SITARA GROUP Sitara Group of Industries stands among some of the top notch and renowned Industrial Groups of Pakistan. This Group has manufacturing industries ranging from Chlor-Alkali Chemicals, Textiles (Spinning, Weaving, Processing & Stitching), Energy, Real Estate, Health, Education and Health Fitness.
Sitara Chemical Industries Ltd, the largest Chlor-Alkali Chemical Complex of Pakistan, is engaged in the manufacturing of Caustic Soda, Hydrochloric Acid, Sodium Hypo Chlorite, Liquid Chlorine, Bleaching Powder and other Specialty Chemicals. Sitara Chemicals is also exporter of Chior-Alkali products to India, Sri Lanka, UAE, Malaysia.
Sitara Chemical Industries Ltd was incorporated in 1981 and it began its production of Caustic Soda in 1985, initially at a rate of 30 Metric Ton/per day. The Plant's capacity was gradually increased over the years to current level of 610MT/per day. In addition, various bi-products facilities have been added and expanded from time to time to cope with the growing demand. Company entered into Textile Spinning business in 1995, its Specialty Chemicals and Export Division was established in 2001.
TERM FINANCE CERTIFICATES OF RS. 360 MILLION: The total issue consisted of up to Rs 360 million issued in the form of secured, rated and listed Term Finance certificates (TFCs) being instruments of redeemable capital under the companies Ordinance l984, of which Rs 255 million were made available for private placement and Rs 105 million was offered to general public.
Investors again were entitled to a very lucrative two level share in the profits and loss of chemical division of the company. Total return on profit and loss ranged from 18% to 23%. In order to mitigate risk of loss to the MTFC holders a shariah compliant takaful arrangement was made to which the company contributed its shares of Rs 50 million.
ISLAMIC SUKUK RS. 1,100 MILLION After successful completion of TFC transaction, company considered to issue SUKUK as a source of financing and in 2006 Sitara Chemicals, issued two trenches of sukuk under the diminishing musharkah model of Islamic finance. The financing of the expansion project through a PKR. 1,100 million SUKUK issue was another milestone for the company as well as for Pakistan's Islamic banking industry. The concept of SUKUK is based on the premise that any Islamic financing contract representing ownership in a tangible asset can be bought or sold, and hence can be securitized in the form of tradable securities. The Sukuk issued to date in the GCC region have used Special Purpose vehicles (SPV) as the issuing entity, where the ownership of the assets remains with the SPV and the SPV issues the Sukuk certificates to finance the investors contribution in the assets.
ISSUE OF SUKUK 625 MILLION
The Company being a Chlor-Alkali manufacturer requires electricity as the major input. It's per ton consumption to caustic chlorine is roughly 2500-2600 KWH. Sitara Chemicals had obtained approval of 4.7 MMCFD from SNGPL to use it for the purposes of electricity generation through gas generators. Accordingly SCIL had embarked on setting up a power generation unit comprising of 8 generators of 2.7 MW each at a total project cost of approximately Rs 625 million.
Keeping in view of the electricity requirement of Company at competitive rates, need arose for development of alternative energy resource. In Year 2012, Sitara Chemicals signed an agreement for design and procurement of Coal Based Power Plant having Capacity of 38.5 MW with renowned Chinese Company. Total Project cost was estimated at Rs 3.1 billion and Diminishing Musharika Facility Rs 2 billion from syndication of renowned Islamic Banks of Pakistan. In July 2016, this project has been commissioned and trial production is being taken. First instalment of this facility has been repaid as per its planned schedule.