ABHI issues PKR 2 billion Sukuk with ‘AA’ Rating

May 14, 2023

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Abhi Raises First-Ever Sukuk Bond for Fintech in MENAP Region

Abhi, a Pakistan-based financial platform that allows salaried employees to access funds before their payday, has raised the first-ever Sukuk bond for a fintech in the Middle East, Africa, and Pakistan (MENAP) region. The bond worth Rs2 billion (~$7 million) potentially opens a new funding line for startups that have struggled to attract funds in recent months.

Demand for the Sukuk exceeded expectations, with subscriptions reaching twice the anticipated amount due to the company’s strong credit ratings, creditworthiness, and profitability.

Abhi’s platform enables employees of its partners to withdraw salary advances based on their accrued wages at any time. The fintech funds these advances, and hence, it has no effect on partner employer’s balance sheets and repayments are deducted from the employee’s salary.

“It represents a new era of financial innovation in the country and is expected to have a positive impact on the economy,” it said.

The startup said the bond issuance immediately follows its qualification for the international selection panel (ISP) by Endeavor, and its selection by Hub71 to boost expansion into the Middle East, where Abhi is partnering with companies to financially empower them and their employees.

ABHI has secured “AA” Rating for the Sukuk primarily because of Heavy Security under lien and Short term nature of the Transaction.

The Sukuk is short term in nature with 6 months maturity and prices at 6 Months KIBOR + 3% Spread. PACRA has mentioned that The security structure of the Sukuk will be secured by the following:

1- A charge/lien on the collection account. Customers will deposit their repayments into the Faysal Bank Account. The Company will issue irrevocable instructions to Faysal Bank to transfer funds equivalent to 1/6th of the Sukuk repayment amount from the Faysal Bank account, on a monthly basis, to the Sukuk Payment Account (SPA) maintained with the Faysal Bank.
2-A lien marked on and a right of set-off on the SPA.
3-A registered lien in favor of the trustee over short-term liquid investments amounting to PKR 1 billion (in NBP Islamic Income Fund and at Habib Metropolitan Bank amounting to PKR 500 million each). These funds will be earmarked in favor of Debt Service 4-Repayment Accounts maintained with the Habib Metro Bank and NBP Islamic Income Fund, until maturity, for the benefit of the investors.
5-A hypothecation over the present and future receivables of Abhi (Pvt) Limited in favor of the trustee.
Fifty percent (50%) of the issue size will be available for deployment from the day of the issue, while the remaining 50% will be placed in a Bank(s) or money market fund(s) rated AAA or AA+. The remaining 50% will be gradually available for deployment, in proportion to the retention of funds in the DPA. Proportionate to the amount held in DPA, an equivalent amount from the cash fund can be utilized for deployment in business.

The security structure is designed to protect the interests of the investors and ensure that the Sukuk is repaid in full.

Abhi has raised ~$21mln from renowned venture capital funds and the co-founder’s own investment.
The product line of Abhi includes invoice factoring, which is currently a prime revenue earner, along with EWA and payroll
financing products.

The issuance of the Sukuk bond is a major milestone for Abhi and the fintech industry in Pakistan. It is a sign of the company’s strong financial performance and its potential to grow in the years to come. The bond is also expected to open up new funding opportunities for other fintech startups in the region.