Ghaziabad Municipal Corporation’ green bond listed on BSE bond platform

  • Indian cities have been unable to take the bond route to raise finances. This changed after the capital markets regulator Securities and Exchange Board of India (Sebi) issued new norms for municipal bonds, and the growing focus on environmental, social and governance investing

Staff Writer
First Published8 Apr 2021
India had used recapitalisation bonds before in the FY86 to FY01 period, wherein the government recapitalised PSU banks with a total amount of Rs20,446 crore. Photo: Mint
India had used recapitalisation bonds before in the FY86 to FY01 period, wherein the government recapitalised PSU banks with a total amount of Rs20,446 crore. Photo: Mint

NEW DELHI: The Ghaziabad Municipal Corporation’s green bond was listed on the BSE bond platform on Thursday.

Several municipal corporations have been planning to raise resources by selling bonds and there is a growing appetite for municipal bonds. This, in turn, will also bring in fiscal discipline for the municipalities and make them accountable and answerable.

Also Read | How India’s banking model has changed

“The Ghaziabad Municipal Corporation which raised Rs150 Crore (Base Issue: 100 Crore with the green shoe option of 50 Crore) via Municipal Bonds on private placement basis using the BSE bond platform, was listed on the exchange today. It was opened for a subscription on 31 March, 2020,” according to a statement.

India needs significant resources to build urban infrastructure such as roads and water supply and waste management systems over the next 20 years to meet India’s urbanisation needs. Ahmedabad Municipal Corporation was the first to raise resources by selling bonds in 1998.

“The capital raised will not only enforce financial discipline but also paves way for the Corporation for a bigger fund raising, if needed, in the future. We saw an interest of at least 40 bids attracting a total subscription of Rs401 crore. This had come within minutes on the bid date and that too with a very competitive coupon rate of 8.10%, which is one of lowest in municipal bonds in India. This is also the first-ever green bond issued by any municipal corporation in India,” said Mahender Singh Tawar, municipal commissioner, Ghaziabad Municipal Corporation, in a statement.

Enthused by the response, Indian cities have been ramping up their municipal bond's issuance plans.

“The coupon rate of the taxable bond was fixed at 8.1% per annum and is rated AA by India Ratings and AA(CE) by Brickworks and has a maturity of 10 years with a staggered redemption. Additionally, the company received Rs19.5 Crore incentive from Government of India for raising Municipal Bonds,” the statement added.

Indian cities have been unable to take the bond route to raise finances. This changed after the capital markets regulator Securities and Exchange Board of India (Sebi) issued new norms for municipal bonds, and the growing focus on environmental, social and governance investing.

“The capital raised is proposed to partially fund the tertiary sewage and water treatment plant, which is estimated to cost approximately 239.93 crore,” the statement said.

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