Banga Building Material Ltd (BBML), the maker of RFL uPVC doors, sheets, ceiling panels, and furniture, is going to raise Tk300 crore through Sukuk for capacity expansion at its Habiganj industrial park unit.
A sister concern of the RFL Group, Banga Building Material Ltd has appointed City Bank Capital Resources as the arranger and adviser for the issuance of the Shariah-compliant asset-backed securities, according to a press statement.
PRAN-RFL Group's Finance Director Uzma Chowdhury and City Bank Capital's Managing Director Ershad Hossain have signed an agreement in this regard on behalf of the respective parties.
At the signing ceremony, Uzma Chowdhury said, "The BBML will use most of the Sukuk fund to finance the machinery it needs for its planned expansion."
Some of the money will also be used to pay back the Shariah-compliant banks who financed the letter of credit for the import of the machinery, she added.
The investment bank's parent company City Bank's MD Mashrur Arefin, and many high officials from both sides were present at the signing ceremony held in the capital yesterday.
Unlike bonds that offer debts to businesses, Sukuk is a project financing instrument which is offered to investors against specific underlying assets.
The investors earn rental income over a predetermined period against the assets they helped purchase.
A trustee remains as the bridge between the investors and the company.
The company which uses the assets and pays investors back is called the originator of the Sukuk, while the trustee is the legal issuer.
After the end of the instrument's tenure, the originator buys the assets and returns the capital to the investors.
Since Sukuk does not directly offer interest income, the instrument is a Shariah-compliant one and is gaining popularity among the world's Muslim investors.
The financial cost of a Sukuk is less than what commercial banks charge for loans.
Bangladesh also entered the Sukuk era a year ago with the government collecting Tk8,000 crore through it for a national safe water project.
Similarly, Beximco Limited, a leading conglomerate in the country, is collecting Tk3,000 crore from investors to finance its environment-friendly expansions in textile, alongside two solar power projects.
PRAN-RFL Group, already well positioned in the debt market home and abroad, is now set to join the list if the Sukuk gets regulatory approval from the Bangladesh Securities and Exchange Commission (BSEC).