The first-ever attempt to raise funds for metro projects in the country through bonds has been put off. Set to raise Rs. 500 crore from the domestic market, Bangalore Metro Rail Corporation Ltd. (BRMCL) has postponed the issue of bonds citing market volatility.
In mid-June, the BMRCL announced it would issue the bonds at the end of the month and had hoped at that time that other metro corporations in the country would follow suit.
The Namma Metro had received ‘IND AA’ rating, and had announced issuing of secured bonds — non-tax free and non-convertible debentures — through private placement.
“At present, the market is volatile and our adviser, SBI Capital, has advised us not to go anywhere near the market,” said N. Sivasailam, managing director of BMRCL, at a public interaction here on Saturday. “We will be in the market soon and when it is stable.” He also said the metro assets would last for 200 years, with a little bit of retro fitments.
The BMRCL, which is estimated to spend Rs. 11,609 crore for the 42-km first phase, had hoped to repay some of its costly loans and reduce the burden by issuing 10-year bonds. The corporation, a joint venture project of Union and State governments, has been funded by Japan International Cooperation Agency and Agence Francaise de Development.
“We will go ahead with the bond issue when there is appetite for bonds at lower rate of interest,” a senior BMRCL official told The Hindu.
“Usually, an AA rating should fetch us funds at the interest rate of 8 to 8.2 per cent, while given the present market condition, the rate of interest is between 9 and 9.5 per cent.”
The official also said the market is expected to be stable in one-and-a-half months. “The entire process for issue of bonds is ready and the corporation will follow the advice of SBI Capital on the timing of the issue of bonds. The AA rating will remain the same, ” he said.