Mumbai: The Greater Hyderabad Municipal Corporation (GHMC) on Wednesday raised Rs200 crore through sale of municipal bonds marking the comeback of such instruments after nearly eight months.

In June 2017, Pune Municipal Corporation (PMC) had raised Rs200 crore. This was the first municipal bond sale in at least 14 years.

On Wednesday, GHMC priced these bonds, maturing in 10 years, at a coupon of 8.90%, which will be paid twice in a year. The unsecured bonds are rated AA by India Ratings and CARE Ratings.

The bonds will be listed on exchanges.

B. Janardhan Reddy, commissioner of the civic body, said that the fund-raising is a part of Rs1,000 crore of borrowings proposed to be raised through bonds till fiscal year 2019. The next tranche could be expected in two months.

The funds raised through the bond issue will be utilized to build roads, flyovers and other infrastructure aimed at reducing travel time and traffic congestion in the city.

Of the total cost of the project, Rs1,000 crore is to be raised from bonds, Rs1,500 crore from loans, and Rs2,500 crore from external commercial borrowings. The remaining Rs1,018 crore would be GHMC’s contribution.

Ashwani Bhatia, president and chief operating officer at SBI Capital Markets, said that the bond issue saw response from a wide range of investors including insurance companies and pension funds.

SBI Caps was the sole arranger for the issue

The bond issue of the civic body is backed by a structured payment mechanism, which provides maximum safety to investors. Here, property tax and user charges collected by the GHMC will be deposited in a separate escrow account every month for debt servicing of bonds. Bhatia said that SBI Caps is working with other municipal bodies, which are rated AA and better, and sales worth at least Rs1,000 crore could be expected in the next six months.

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