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

Daily Cover
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.

Retail in the Philippines set to soar and spread - OBG

Retail in the Philippines set to soar and spread

Strong economic growth is boosting consumer purchasing power in the Philippines, driving retail sales and creating opportunities for investment by both local and international chains.
In January the Philippine Retailers Association (PRA) announced it expected double-digit retail growth in 2013,... Read more.

Did you know you can get OBG’s Economic Updates on Facebook? Like us on Facebook now to get our news fed directly to your page – click here:

Malaysia: New regulations to boost market for takaful - OBG

Malaysia: New regulations to boost market for takaful

An overhaul of Malaysia’s Islamic finance regulations is expected to increase take-up of sharia-compliant insurance (takaful) products, although the new rules could encourage smaller operators to join forces with more established rivals.
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.

Did you know you can get OBG’s Economic Updates on Facebook? Like us on Facebook now to get our news fed directly to your page – click here:

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/; David Lee, +603-2082 2255/

August 28, 2013

Bank of London and The Middle East finances Christchurch Group’s acquisition of competitor, Hunters Moor - IFN

Daily Cover
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.

Related Posts with Thumbnails