Iran’s Largest Steelmaker Raises $28m in Bond Sale
Economy, Business And Markets

Iran’s Largest Steelmaker Raises $28m in Bond Sale

Demand for fixed-income securities is high among Iranian investors, as decreasing deposit rates leave bonds as the only high yield investment.
Demand outstripped supply 15 to one in Mobarakeh Steel Company’s sale of Murabaha sukuk, Islamic bonds, on Tuesday. The company sold 1 million two-year Murabaha bonds to raise one trillion rials ($28.5 million).
The bonds, which pay 20% interest per annum in quarterly intervals, were sold on the Iran Fara Bourse over-the-counter market.
Commercial lenders have dropped the deposit rates they offer continuously for the past two years. Interest on one-year deposits has dipped from 27% per year two years ago to 16% now. The last drop came a month ago when major lenders shaved two percentage points from deposit rates, in response to pressure from the government and the Central Bank of Iran.
Declining interest rates come at a time when equity markets are in a bearish slumber with no hope of a change in their fortunes.
Corporate earnings have slumped due to low business investment and near non-existent consumer spending; in other words, an ongoing recession in Iran’s economy.
Stocks on Tehran Stock Exchange rose to a four-week high on Thursday’s market close, 2.3% off a five-month low hit on 21 July.
The absence of even the faintest hope of a rebound in stocks in the short- to mid-term future has multiplied demand for fixed income securities among mutual funds and individual investors. Thus, orders by institutional investors were limited to 50,000 securities, while other investors could not get more than 20,000 sukuks.
Nevertheless, there were 15 trillion rials ($427 million) of buy orders for MSC’s Murabaha sukuk.
To work out who got how many bonds, the ticker for the bonds was closed to bids at 12:00 a.m. Tehran time. The bonds were allocated based on the size of the orders, so it was not a first come, first served sale. The allocation of the bonds to buyers carried on till 08:00 p.m., way after trading hours.
Bond prices cannot fluctuate freely in Iran, so prices cannot adjust based on supply and demand, leading to queues for buying and selling securities.
Murabaha sukuk are certificates of equal value issued for financing the purchase of goods based on Murabaha contract. Sukuk holders become the owners of the underlying goods. These sukuk are typically issued by the seller of the Murabaha goods, while the subscribers are the buyers of those goods.
Funds realized from the sukuk issue are used to purchase the underlying goods. Being the owners of Murabaha goods, sukuk holders are entitled to receive its sale price.
MSC is Iran’s leading steel-producing company with a market share of 47% in 2015. The state-owned company, with an integrated flat steel production capacity of 5.2 million tons of steel sheet products, has announced a program to increase its steelmaking capacity to 25 million tons/year by 2025, from 6 million tons in 2015.
The company is constructing an iron ore concentrate and pellet production plant, each with an annual production capacity of 5 million tons.

Short URL : http://goo.gl/SZN4RO
  1. http://goo.gl/0yjKAG
  • http://goo.gl/88gtZV
  • http://goo.gl/8Knsvl
  • http://goo.gl/Ht25K9
  • http://goo.gl/m5anmS

You can also read ...

Turkey Worries Over Impact of Anti-Iran Sanctions
Turkey’s Economy Minister Nihat Zeybekci said his country “...
Currently, each US dollar is reportedly being traded for as much as 75,000 rials in Tehran’s black market.
Seventy days after the government decided to unify the US...
Gao Feng
China will maintain normal relations with Iran, the Commerce...
Fintech Event Highlights Women Business Leaders
The 5th round of Iran’s Financial Technology Event known as...
Train Fares  Rise 10%
Train fares have risen by 10% as of June 22, a member of the...
Mobile Phone Imports on the Rise
Iran’s cellphone imports bill for the first two months of the...
Iran’s startup ecosystem has boomed in recent years.
Privately owned Bank Pasargad is poised to increase its...
Iran’s Minister of Industries, Mining and Trade Mohammad Shariatmadari (L) and Serbian Minister of Trade, Tourism and Telecommunications Rasim Ljajic (2nd R) address a press conference in Belgrade on June 21.
Iranian Minister of Industries, Mining and Trade Mohammad...