Mayar Holding, a Saudi Arabian industrial manufacturing company, announced plans to raise $133 million through the issuance of a sharia-compliant bond, known as a sukuk. The issuance, denominated in Saudi riyals (SAR), will target a total value of SAR 500 million, with the proceeds earmarked for funding working capital needs and capital expansion projects.
Afaq Financial Company has been appointed as the financial advisor for the establishment, issuance, and offering of the sukuk program. The program will utilize a Murabaha structure, an Islamic financing technique where the issuer (Mayar Holding) purchases an underlying asset from the investor (sukuk holder) and resells it at a profit. Investors benefit by receiving installments on the agreed-upon profit throughout the sukuk’s term.
The issuance is subject to approval from the Saudi Capital Market Authority (CMA). The company has not yet disclosed the specific terms of the sukuk, such as the profit rate or the issuance date. However, they have confirmed a 24-month tenor, indicating a two-year investment period for sukuk holders.
This move by Mayar Holding reflects a growing trend in the region towards utilizing Islamic finance instruments for corporate fundraising. Sukuk offerings provide a viable alternative to conventional bonds for companies seeking sharia-compliant financing solutions. The instruments offer investors the opportunity to participate in the growth of a company while adhering to Islamic principles that prohibit earning interest.
The success of Mayar Holding’s sukuk issuance will be keenly observed by the financial community. A positive reception could encourage other industrial companies in the region to explore similar fundraising strategies. This could lead to increased liquidity within the Islamic finance sector and contribute to the overall growth of the Saudi Arabian capital market.
Mayar Holding’s decision to leverage sukuk financing underscores the company’s commitment to both its financial goals and its adherence to Islamic principles. The issuance, if approved, is expected to provide the company with the necessary capital to fuel its working capital requirements and pursue strategic expansion plans.
