By: Ashwin Manikandan
Mumbai: The Amdavad Municipal Corporation (AMC) has raised Rs 200 crore by selling ‘muni bonds’, meant for funding urban infrastructure development.
With a maturity of five years, the bonds offer an interest rate of 8.7%. Rating company Crisil has given the papers an AA+ (structured obligation) grade, the highest municipal bond rating in the country. Structured obligation (SO) offers additional support, adding to investor confidence.
“We’ve gone through an elaborate credit rating process,” said Vijay Nehra, commissioner, Ahmedabad Municipal Corporation. “We are using this money (Rs 200 crore) in our contribution to the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) project, which focuses on establishing a robust urban infrastructure for sewage, water supply and infrastructure solutions.”
Multiple investors bid to buy such debt papers on the exchange platform, with the local body obtaining Rs 1,085 crore worth of subscriptions, a person with direct knowledge of the matter said. The additional bids were rejected, retaining the targeted size at Rs 200 crore.
“One Gujarat district cooperative bank and a state-owned entity have subscribed the papers,” the person cited earlier said.
AMC was the first municipal corporation in Southeast Asia to raise money through public issuances when it had raised Rs 100 crore in 1998. This is the fifth time AMC has raised money through public issuance of bonds.
“We have a strong track record of raising money and paying back without any delays and defaults,” said Nehra.
SBI Capital Markets and Tipson helped AMC to arrange the bond sale.
Municipal bonds have been gaining momentum with local bodies from Maharashtra, Madhya Pradesh and Gujarat tapping the capital market.
Issuances of municipal bonds have been incentivised by the government to bring transparency and create a discipline in the financial performance of municipal corporations.
Source: Economic Times