Dubai: Cheraman Group, India’s first Sharia-compliant non-banking company is planning to fund several infrasturcture and industrial projects in the country. The company is gearing up to raise a large portion of its authorized capital of Rs10 billion (Dh588 million) from investors in the Middle East.
Some of the directors of the group’s holding company Cheraman Financial Services Limited (CFSL), in which the Government of Kerala has a 11 per cent stake, met in Dubai last week and had consultations with senior officials of some of UAE’s banks and financial institutions as well as high net worth investors.
“We saw a tremendous deal of response to it,” said APM Mohammad Hanish, secretary to the government of Kerala. Hanish is also on the board of directors of the company.
“My estimation would be that with some deal of effort from our side and a greater deal of realisation of the potential of this institution — certainly from the initial talks here in Dubai and UAE, where I got excellent signals — I really believe that a substantial portion of the authorised share capital could be obtained from across the Middle East. We intend to have similar visits and discussions in Qatar, Oman and Saudi Arabia,” Hanish, who was visiting Dubai last week, told Gulf News in an exclusive interview over the phone.
The CFSL was pioneered by the Government of Kerala through its institution, Kerala State Industrial Development Corporation. The remaining 89 per cent of the equity stake is held by private investors—mostly Gulf-based NRIs (non resident Indians). Almost all the founding directors of the company are Gulf-based entrepreneurs, including P. Mohammad Ali of Oman-based Galfar Group, who is the chairman of CFSL and C.K. Menon of Qatar-based Behzad Group, who is the vice chairman.
Galfar’s P. Mohammad Ali told Gulf News last week that the company is planning road shows in the Gulf countries and in different cities in India towards raising the targeted capital, adding that he sees the fund more in terms of ethical or alternative investment rather than just an Islamic product appealing only to Muslims.
In India, reservations have been expressed over the past years on starting a religious based financial institution, mainly banks. It is still not legal to start a bank, based on interest-free Sharia principles. Only after years of consideration did India’s central bank allow the first non-banking licence in July 2103 to CFSL. Though Islamic principles prohibit riba or interest, it does not bar equity-based returns on investments.
The CFSL plans to invest the raised share capital via equity finance, leasing and infrastructure development, especially, large tracts of “wakf” lands that are lying idle in India.
Funds that will be available with the holding company as per share capital will be deployed to put the “wakf” lands into more productive use and the returns would be the dividend and the capital gain. That will be ploughed back to CFSL, which then in turn will share it with its shareholders.
According to Hanish, apart from a commercial complex project, in Kannur which has already started, the company intends to take up more and more Wakf Land for development. It is also going for joint venture and BOT (Build Operate Transfer) projects with major infrastructure developers.
“We will provide the finance and they will do the development and we will run it together,” he said.
CFSL has identified projects in Hyderabad, Calicut (in Kerala) and other places in south India and Mumbai. Some of the projects under consideration include petrochemical and chemical plants and airport, Hanish added.