Pune civic body raises Rs200 crore via municipal bonds
- Pakistan ‘processing’ visa applications of Kulbhushan Jadhav’s wife, mother
- Theresa May says Brexit deal proves critics wrong
- UN council weighs measure rejecting US Jerusalem decision
- Ahead of Gujarat election results, BJP MP predicts dismal performance for party
- California’s wildfire now ranks as state’s third-largest
Mumbai: After a much needed push from the government, municipal bonds are seen taking off with Pune Municipal Corporation (PMC) on Monday raising Rs200 crore, marking the comeback of these instruments after hiatus of at least 14 years.
These bonds were first sold by Ahmedabad Municipal Corporation in 1998.
PMC has also become the first urban local body to raise funds through selling bonds, nearly two years after the Securities and Exchange Board of India (Sebi) issued new norms for municipal bonds.
On Monday, PMC priced these bonds at a coupon of 7.59%, which will be paid twice in a year.
Kunal Kumar, commissioner of PMC, said that the issue was subscribed six times and clutch of investors including banks, insurance companies and pension funds participated in the offering.
He added that with AA+ rating, highest for municipal bonds, PMC was managed to raise funds at a competitive rate. “We were confident on our back-end system. We have improved our financials, we have taken active steps on improving our governance structure and overall we had a very sound project to bring to the market.”
The bond sale was a part of Rs2,260 crore borrowing plan of PMC that will be spread over five years. The next offering could either be in December or in March next year.
The proceeds raised through the bond sale will be used for a water metering project, which is estimated at around Rs3,500 crore, Kumar said.
Apart from the bond issue, the projected is partly self-funded by the PMC and some amount will also come from the Smart City Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT).
Kumar said that the structure of the bond issue has also helped in attracting investors as it ensures timely payment of interest as well principal.
The debt servicing will be from two streams of revenue, user charges and property tax. The property tax will be parked in an escrow account, designated account for repayments.
Ashwani Bhatia, president and chief operating officer at SBI Capital Markets, who was involved in the PMC bond deal, said that New Delhi Municipal Corporation could be the next urban body to sell bonds.
According to bond dealers, PMC’s deal assumes significance as the government is keen on urban local bodies to meet their funding requirement through municipal bonds for various urbanisation projects.