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Iran Khodro to Issue Sukuk Worth $180m

IKCO to Issue Sukuk Worth $180m IKCO to Issue Sukuk Worth $180m

Iran’s largest auto manufacturer plans to issue the largest volume of Islamic bonds the Iranian capital market has seen issued by one entity.

According to the head of Capital Market Central Asset Management Company, Gholamreza Abutorabi, the Securities and Exchange Organization has given the go-ahead to Iran Khodro Group to issue 7 trillion rials ($180 million) worth of Murabaha sukuk to finance the purchase of parts and materials required for auto manufacturing.

The exact date for the bond issue has not been announced yet. The securities will be offered on Tehran Stock Exchange, mature in four years and have a return rate of 18%.

The capital market’s last largest bond issue was by IKCO’s rival, SAIPA, in November 2016 when 5 trillion rials ($128.6 million) worth of sukuk were issued. Murabaha is an Islamic financing structure in which an intermediary buys a property with a free and clear title.

Similar in structure to a rent-to-own arrangement, the intermediary retains ownership of the property until the loan is paid in full.

Comments

Good day, The comment "Similar in structure to a rent-to-own arrangement, the intermediary retains ownership of the property until the loan is paid in full." is incorrect. According to the laws of Shariah/Islamic Finance, full title/ownership of the property passes to the purchaser upon conclusion of the sale. Yes, the purchaser can pledge the financed asset as security for the outstanding debt, but the purchaser is the rightful owner.

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