Real Investment and Development Company, listed on the parallel market (Nomu), announced a new strategic step aimed at strengthening its financial position and expanding its operational activities, as the company signed a deferred sale agreement (Islamic financing) today with Al Rajhi Bank, one of the largest banking institutions in the Kingdom of Saudi Arabia.
Financial agreement details
The company revealed in an official statement published on the Saudi Stock Exchange (Tadawul) website that the financing amount is SAR 30 million. This agreement is part of the company's plans to secure the necessary liquidity to finance the purchase of new vehicles, reflecting its commitment to modernizing and expanding its fleet to meet growing market demand.
Riyal explained that the financing term extends for three years, which gives the company good financial flexibility to manage its cash flow. Regarding the guarantees provided to obtain this financing, the company indicated that it provided a personal guarantee, in addition to assigning an insurance policy in favor of the bank, which are standard credit procedures in such commercial transactions to guarantee the rights of the financing parties.
Expansion and market competition objectives
The importance of this agreement extends beyond the financial aspect to include strategic and operational dimensions. The company confirmed that the primary objective of this financing is to support its business growth and the expansion of its operations. By increasing the size of its fleet, "Real" aims to enhance its competitiveness in bidding for new tenders and securing long-term contracts with both the public and private sectors.
Context of the car rental sector in the Kingdom
This move comes at a time when the car rental and fleet management sector in Saudi Arabia is witnessing remarkable growth, driven by the significant economic momentum generated by the Kingdom’s Vision 2030. The flourishing tourism sector, the increasing number of international companies based in Riyadh, and the various events and entertainment seasons have led to a surge in demand for transportation and vehicle rental services.
Deferred payment agreements, or Tawarruq and other Islamic financing methods, are vital tools relied upon by companies with asset-heavy operating models, such as car rental companies, to ensure the continuous modernization of the fleet without depleting immediate cash flow, allowing them to direct their own resources towards developing technologies and improving the customer experience.
Expected financial impact
This expansion is expected to positively impact the financial statements of Riyal Investment and Development Company in the coming periods, as the new fleet will contribute to generating additional operating revenues. Furthermore, Al Rajhi Bank's confidence in providing this financing reflects the company's strong financial position and its ability to meet its obligations, thus enhancing its creditworthiness in the financial market.
