Beyond its historic status as the first-ever Sukuk listed on the Colombo Stock Exchange, the Islamic capital instrument issued by renewable energy firm Vidullanka also encapsulated some critical evolutions for Sri Lanka’s domestic financial industry.
As one of the corporate advisers for this issuance, ADL Capital Managing Director Ishrat Rauff shared some key insights with IFN Investor on overcoming various hurdles ahead this offering – which was oversubscribed in a matter of hours when it opened locally on the 17th June 2025.
As the facilitating regulatory mechanism for Sukuk was only introduced in May 2024, compared to conventional debentures, that can be issued in six weeks from when the whole process is initiated, more than a year was taken for this Sukuk.
“That in itself would give you an indication how challenging it was. It was a learning curve and experience for the regulators as well as the local rating agencies. We worked with Fitch, which brought in expertise from outside Sri Lanka.”
A tricky aspect was ensuring the assets were not formally transferred – as the title under a new separate entity would have attracted stamp duty and tax implications. “As a result, we had to have a quasi-structured SPV,” Ishrat said, where the user benefit was obliged out – referencing the common asset-based Sukuk.
Getting Shariah certification led ADL Capital beyond appointing one individual already in Sri Lanka to secure experts in Malaysia, Saudi Arabia and South Africa. This extra precaution was taken even though Sri Lankan rules only needed three Shariah experts.
In overcoming these challenges, the Vidullanka Sukuk also helped to expand Sri Lankan capital market instrument tenors.
Since there was previously no product in the market of more than three years – which was typically granted only to very special clients like high-net-worth individuals – this Sukuk’s five-year tenor created a massive step forward as it opens up a new dimension to investors.
Despite all these gains, Ishrat admitted, the offering did not excite foreign investors as the total amount raised by the Sukuk listing on the 4th July 2025 was just LKR500 million (US$1.66 million).
Apart from the small ticket size, “a bigger issue is potential currency devaluation as this is a Sri Lankan rupee-denominated Sukuk. Your return in rupees can be great, but if the US dollar appreciates by more than 10%, it makes the whole investing exercise futile.”
