Civic bodies line up bond issues; Pimpri Chinchwad may hit mkt in Feb

Informist, Thursday, Jan 12, 2023

–Sources: Pimpri Chinchwad civic body likely to hit bond mkt Feb

–Pimpri Chinchwad civic body plans 2-bln-rupee bond issue

–Ahmedabad Municipal Corp looking to raise funds via bonds

–Vadodara Municipal Corp eyes fundraising via bonds

By Subhana Shaikh

MUMBAI – India’s corporate bond market is set to witness a slew of bond offerings from municipal corporations, sources aware of the development told Informist.

While Pimpri Chinchwad Municipal Corp is likely to tap the debt market next month, Ahmedabad Municipal Corp and Vadodara Municipal Corp plan to raise funds through bonds in the near term, sources said.

“PCMC’s bond issue is still work in progress, but they are targeting to issue the bond next month. Ahmedabad and Vadodara are in the initial stages,” a source involved in the transactions told Informist.

Ahmedabad and Vadodara local bodies are getting their basic approvals to issue bonds, the source said, adding that Ahmedabad Municipal Corp’s issue could be of green bonds.

Pimpri Chinchwad Municipal Corp, the civic body that governs the neighbourhoods of Pimpri, Akurdi, Chinchwad, Nigdi, is looking to raise 2 bln rupees through the bond issue, the source said.

The bonds are rated ‘AA’ by CRISIL.

Though the municipal body is looking at a five-year bond, discussions on the tenure are still in progress. “Most likely it is going to be a 5-year bond issue, but it is still being discussed whether to do a five- or 10-year bond,” the source added.

SBI Capital Markets is the sole arranger for the Pimpri Chinchwad Municipal Corp bond issue.

“Their project is worth 5,000 crores (50 bln rupees) and this series will be of 200 crores only (2 bln rupees). The civic body may look for alternative sources of financing as well,” another source said.

Proceeds of the issue are being earmarked for the development of Mula river project. This will be the civic body’s first ever bond issuance.

Informist had last month reported that Indore Municipal Corp’s plan to raise up to 2.44 bln rupees through public issue of green municipal bonds that carry separately transferable and redeemable principal parts.

Indore will be the first municipal corporation to tap the public issue route for raising bonds.

The Reserve Bank of India’s report on municipal financing in November had suggested the need for local bodies to explore alternative sources of funding such as bond issuances.

The central bank said that access to the debt market for smaller urban local bodies can be enhanced through pooled financing, under which a common bond is issued by pooling the resources of several local bodies.

Vadodara Municipal Corp had last tapped the bond market in March 2022. The civic body had raised 1 bln rupees through bonds maturing in five years at a semi-annual coupon of 7.15%. The issue was fully subscribed.

Ahmedabad Municipal Corp is among the first municipal bodies to raise capital through bonds in 1998. The civic body had last raised 2 bln rupees through five-year bond at a coupon of 8.70% in January 2019.

Though the first municipal bond in India was floated in 1997, the market had nearly fizzled after 2005 with the central government giving funds to local bodies under the Jawaharlal Nehru National Urban Renewal Mission.

Issuance of municipal bonds has somewhat improved since 2017. The government provides a lump-sum grant-in-aid of 130 mln rupees per 1 bln rupees for municipal bond issuances under the Atal Mission for Rejuvenation and Urban Transformation Programme. End

Edited by Maheswaran Parameswaran

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