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INDIA: Kerala
State Industrial Development Corporation (KSIDC) has received approval from
the Reserve Bank of India (RBI) to establish a financial services company
operating under the principles of Islamic finance. KSIDC will launch Cheraman
Financial Services (CFSL) as a pioneer Shariah compliant non-banking
financial company with an authorized capital of INR10 billion (US$159.43
million). RBI’s endorsement, coupled with the authorization from India’s
regulators, the Securities and Exchange Board of India, will allow CFSL to
enter into Shariah compliant venture capital funding activities.
Speaking to Islamic Finance news,
H Abdur Raqeeb, convenor of the National Committee on Islamic Banking and
general-secretary of the Indian Center for Islamic Finance, says he welcomes
RBI’s move in its support for KSIDC to float a non-banking finance company.
In his campaign to advance the implementation of Islamic finance in the
country, Abdur Raqeeb also noted the pending legal action in the Bombay High
Court brought by Alternative Investments and Credit (AICL), a Kerala-based
Shariah compliant investment firm, against an RBI order which revoked AICL’s
NBFC license earlier this year.
India’s Banking Regulation Act 1949 which prohibits banks to
invest on a profit-loss sharing basis and requires all banks to pay interest
is among the regulations that contradict the fundamental principles of
Islamic finance, says Abdur Raqeeb. He also adds that Dr Raghuram Govind
Rajan, whose appointment as the new governor of RBI which will take effect on
the 4th of September, will positively facilitate the
implementation of Islamic finance in India.
According to CFSL’s chairman Muhammed Ali, the company will
target the infrastructure, services and manufacturing sector as the license
does not extend to commercial banking operations. The company, previously
known as Al Baraka Financial Services, was established with equity
participation of private investors, mostly from the Gulf and the KSIDC.
CFSL’s maiden commercial venture will be in collaboration with
an Indian charity organization, Kannur Muslim Jama-ath, across various
infrastructure and development projects via the firm’s INR2.5 billion
(US$39.86 million) venture capital fund. KSIDC is set to be the single
largest shareholder with an 11% stake, while other individual shareholders
are entitled to a maximum of a 9% shareholding in the company. With financing
start-up projects being one of the company’s pilot programs, the Shariah
compliant CFSL will be launching roadshows in India and several Gulf
countries beginning next month.
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Saturday, August 31, 2013
Government-backed Kerala State Industrial Development Corporation receives central bank approval to set up India’s first Islamic non-banking finance company - IFN
Retail in the Philippines set to soar and spread - OBG
Retail in the Philippines set to soar and spread
In January the Philippine Retailers Association (PRA) announced it expected double-digit retail growth in 2013,... Read more.
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Malaysia: New regulations to boost market for takaful - OBG
Malaysia: New regulations to boost market for takaful
New legislation came into effect on June 30, along with parallel laws revamping the operations and regulation of the conventional financial sector. The new Islamic Financial Services Act (IFSA) replaces previous legislation enacted over the past 30 years, ... Read more.
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Friday, August 30, 2013
RAM Ratings reaffirms AAA rating of Sabah State Government’s bonds
Published on 29 August 2013
RAM Ratings has reaffirmed the
AAA long-term rating of the State Government of Sabah’s (“the State
Government”) RM544 million Bonds (2009/2014) (“the Bonds”), with a stable
outlook. The Bonds had been raised and issued with the approval of the Ministry
of Finance. Although we do not consider this approval as tantamount to a direct
guarantee by the Federal Government, we believe that support will be readily
extended to the State Government, if required. Notably, the State Government
continues to enjoy a supportive relationship with the ruling Barisan Nasional
(“BN”) coalition.
Sabah (“the State”) is endowed
with a wealth of minerals, agricultural land, biodiversity and cultural
heritage – which form the backbone of its economy. The primary sector (agriculture
and mining) is the mainstay of the State’s economic output – contributing
approximately 40% of its GDP in 2010. Sabah’s economy relies much on the
exports of its primary commodities. It lays claim to Malaysia’s largest areas
of oil palms, i.e. 1.4 million hectares or 29% of the country’s total planted
hectarage. The State is also an important cog of the Malaysian economy by
virtue of its crude-oil production. Demand for both these primary commodities
is seen to be relatively sustainable, thus providing some resilience to Sabah’s
economy. Aside from the primary sector, the services sector – which represents
half of the State’s economy – is an important growth driver too. The services
sector, while largely tourism-driven, also caters to the increasing size and
income of the State’s population.
The State Government boasts a
stronger fiscal-adjustment capacity than its counterparts in Peninsular
Malaysia. Under the Constitution, the State Government is accorded additional
revenue sources, including import and excise duties on petroleum products,
export duties on timber-related products, fees and dues from ports and
harbours, water rates, revenue from licenses connected with water supplies and
services as well as state sales taxes. The State Government is also entitled to
yearly cash payments from national oil giant Petronas, equivalent to 5% of the
value of the petroleum extracted from areas in Sabah, under an agreement
executed on 14 June 1976. As the State Government derives a significant
proportion of its revenue from commodities, its budgetary performance is highly
sensitive to commodity price movements.
The recent incursion by armed
militants of the Sultanate of Sulu had little immediate direct impact on the
State’s economy and overall public finances, as evidenced by the robust growth
of its palm-oil production, tourist arrivals and investment activity during and
in the month following the episode. Furthermore, the federal authorities have
taken steps to address security concerns, highlighting once again the
supportive relationship that the State Government enjoys with its federal
counterpart. Despite the minimal direct economic impact, RAM will continue
monitoring any reputational damage that may arise from this incident.
Media contact
Jason Fong
(603) 7628 1103
MARC has affirmed its rating on Celcom Networks Sdn Bhd's (CNSB) (formerly known as Celcom Transmission (M) Sdn Bhd) RM5.0 billion Sukuk Murabahah Programme at AAAIS with a stable outlook.
CNSB is the owner of Celcom Axiata Berhad Group's (Celcom Group)
network assets and serves primarily as a network service provider to parent
company Celcom and fellow subsidiary Celcom Mobile Sdn Bhd (CMSB).
The rating reflects the credit
strength of consolidated entity Celcom Group, premised on the strong intra-group
support and significant financial and operational links between CNSB, Celcom
and CMSB. MARC's support assessment is also underpinned by a letter of support
from Celcom which commits the holding company to hold directly or indirectly a
100% equity interest in CNSB throughout the sukuk tenure. While the letter of
support does not constitute a legally enforceable guarantee, it is nonetheless
viewed by MARC as a strong indication of support by Celcom.
The affirmed rating and outlook
are underpinned by Celcom Group's strong operating cash flow (CFO) generation
capability, steady operating track record and its strong competitive position
within the domestic wireless market. Celcom Group's market strength continues
to be supported by its mobile network quality in terms of coverage and
capacity. Somewhat moderating these strengths are (i) the high reliance on
Celcom Group's upstream dividend payments at Axiata Group Berhad (Axiata),
Celcom's parent, to fund the latter's regional expansions, (ii) its rather aggressive
consolidated capital structure and (iii) intense competition in the mobile
communications business which poses downside risks to its operating margins.
With 2012 revenues at RM7.65
billion, Celcom is the second largest player in the domestic mobile
market. Celcom has further consolidated its position as the market leader
in the wireless broadband segment with positive growth in its subscriber base
achieved in part by offering low monthly usage commitment plans. MARC notes
that Celcom's subscriber base of 12.7 million is catching up with market leader
Maxis Communications Berhad's 12.9 million revenue generating subscriber base
as at end-2012. To sustain its market position and to accommodate the rapid
growth of mobile data traffic, Celcom Group has been spending approximately
RM800 million annually to upgrade its network infrastructure in the past two
years. Celcom Group's ability to monetise the data traffic will be an important
driver of its longer-term revenue growth. Celcom also has strategic partnerships
with six mobile virtual network operators and DiGi Telecommunications Sdn Bhd
and is planning to commence its home broadband service in the second half of
2013 in collaboration with Telekom Malaysia Berhad. In the near term, Celcom
Group is likely to sustain its revenue streams and counter narrowing margins
through continuous expansion of its voice, SMS and data traffic, introduction
of new services and product bundles, and implementation of cost optimisation
measures.
Celcom Group's financial performance
measures continue to be consistent with the affirmed rating. In 2012, Celcom
Group posted higher pre-tax profit of RM2.32 billion on revenue of RM7.65
billion compared to pre-tax profit and revenue of RM2.18 billion and RM7.14
billion respectively in 2011. Celcom Group added 701,000 subscribers to its
subscriber base, ahead of the competition. As a result of the group's
aggressive customer acquisition drive in 2012, Celcom managed to increase its
revenue in spite of the termination of its domestic roaming arrangement with U
Mobile Sdn Bhd (U Mobile) in September 2012. While the termination of service
with U Mobile impacted average revenue per user (ARPU) which fell from RM51 in
3Q2012 to RM49 in 4Q2012, the overall financial impact on Celcom Group's
consolidated financial performance was modest. U Mobile only contributes 2% of
the group's revenue. The steep discounts offered on mobile phones resulted in a
slight narrowing of the group's operating profit margin, combined with higher
staff costs in 2012.
While Celcom Group's financial
performance continued to be characterised by strong profitability and cash flow
generation, its shareholders' funds and free cash flow turned negative after
upstreaming dividends of RM3.09 billion to Axiata during the year. The negative
consolidated shareholders' funds of RM644.1 million is attributed to the
elimination of an intercompany gain from a sale of network assets to CNSB in
2010. The transaction had enabled Celcom to upstream high levels of dividends.
Nonetheless, the stable outlook on the rating factors in expectation that
Celcom's free operating cash flow generation for 2013 will be positive and the
absence of large upstream dividend payments to Axiata in the near-term will
assist the group to restore its cash flow protection and leverage metrics to
levels more appropriate to its rating. Celcom's debt service capacity as
measured by its CFO debt coverage of 0.67 times (2011: 0.49 times) remains
strong.
Downward rating pressure could
surface from a reduction in CNSB's strategic importance to Celcom Group which
would warrant a change in its rating to reflect reduced intra-group support,
increased exposure to parent credit risk which may require the rating to be
brought more in line with Axiata's, and/or a material deterioration in Celcom
Group's consolidated financial metrics.
Contacts: Koh Shu Yunn,
+603-2082 2243/ shuyunn@marc.com.my;
David Lee, +603-2082 2255/ david@marc.com.my.
August 28, 2013
Bank of London and The Middle East finances Christchurch Group’s acquisition of competitor, Hunters Moor - IFN
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Daily Cover
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UK: The
Bank of London and the Middle East (BLME), a leading financier to the UK
mid-market and one of Europe’s largest Islamic banks has successfully closed
two financing facilities with Christchurch Group (Christchurch), a UK-based
neurological rehabilitations specialist for the acquisition of competitor
Hunters Moor, which provides similar services to Christchurch. The
acquisition will make Christchurch one of the largest independent
neurological rehabilitation providers in the UK, increasing their capacity by
60%.
The first facility, an acquisition finance facility, saw UK
mid-cap private equity firm Sovereign Capital work alongside BLME to provide
equity for the deal; while the second aspect of the funding involved a
rollout facility for the purchase and development of new properties across
Christchurch’s target markets.
Commenting on the deal, Jervis Rhodes, head of corporate banking
at BLME said: “The completion of these rounds of financing with the
Christchurch Group have strengthened our relationship with Sovereign Capital
and added to our existing healthcare sector expertise.” He added that the
deal is testament to BLME’s strong position in providing accessible and
competitive solutions to meet the specific financing requirements of the UK’s
mid-market corporates at a time when access to finance remains a challenge
for medium-sized businesses in the UK.
The deal is expected to increase Christchurch’s geographic
footprint which now encompasses Oxfordshire in the south of England, to
Yorkshire in the north; enabling the healthcare provider to meet the
increasing demand for its specialized services.
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