Details

Case

Sitara Chemical Industries Ltd.

Qurat-ul-Ain, Naim Sipra

INDUSTRY : Chemicals

AREA : Finance

ORGANIZATION : Sitara Chemicals Ltd.

LENGTH : 16

LUMS No : 02-604-2003-1

PUBLICATION YEAR : 2003

KEYWORDS:

Sitara Chemical Industries Limited,Finance,Chemical,Shariat,Court,Legal,MTFC,Musharika Team Finance Certificates,Chemicals Division

DESCRIPTION:

In its judgement dated December 23, 1999 the Shariat Appellate Bench of the Supreme Court of Pakistan declared that all laws involving interest would cease to have effect by June 30, 2001. The Court concluded that the existing financial system had to be subjected to radical changes to bring it into conformity with Shariah. In response to the above directive as well as the desire of the owners of the company to rid the company of interest bearing debt Sitara Chemical Industries Ltd. (SCI) came out with its first issue of Musharika Term Finance Certificates (MTFC) in 1999-2000. This MTFC issue was the first of its kind and allegedly structured purely on the basis of Shariah. This Rs 150-million issue and the subsequent Rs 360 million MTFC were issued for the expansion of the chemicals division of SCI. 

LEARNING OBJECTIVES:

The objective of this case is to demosntrate to the students that they can bring their knowledge of corporate finance and derivatives to bear on the analysis of new Shariah compliant instruments.

SUBJECTS COVERED:

Finance