Aiming to make the most of the bond issue, Greater Hyderabad Municipal Corporation (GHMC) is planning to reinvest the interest accruing on the bonds back into the SRDP projects, and is hopeful to make it a win-win situation for the investors who reposed faith in the corporation. Interest on the funds raised through bonds issue will be credited to an escrow account, 90% of which may be redirected into funding the SRDP (Strategic Road Development Plan), Commissioner B. Janardhan Reddy said.
The GHMC is going for an electronic bidding in Bombay Stock Exchange on August 13 for raising the second tranche of ₹200 crore, from a total ₹1,000 crore aimed to be raised through issue of bonds for the SRDP project. The SBI Capital will act as the arranger of the bid.
“We had an investors’ meet on Tuesday, and only those registered as investors may participate in the bidding. After launch of the bid, they can quote the coupon rate, which is the rate of interest payable over the next 10 years,” Mr. Janardhan Reddy said. Earlier, there was scope to bargain over the interest rate, but the changed SEBI rules have disallowed such bargains, he said. The GHMC has opted to raise the funds through five tranches of bonds issue. This is to avoid payment of more interest on idle funds if the ₹1,000 crore are raised at once, Mr. Reddy said.
The remaining ₹600 crore too will be raised before the end of the financial year, he said.
The corporation raised ₹200 crore as the first tranche at 8.9% rate in February this year, receiving an overwhelming 200% subscription.
The GHMC is only the second corporation in the country to go for bonds issue in recent times, after Pune Municipal Corporation. During the last 60 years, only ₹2,000 crore had been raised by way of bond issue by various municipal corporations including Ahmedabad, Bengaluru, Visakhapatnam, Pune and Hyderabad.
In 2016, Prime Minister Narendra Modi had exhorted the municipal corporations to use issue of bonds to raise funds for developmental programmes, and enquired about it during his visit to Hyderabad for inauguration of Metro Rail.
However, of the total 442, only two corporations have followed Mr. Modi’s instructions so far. The GHMC has received an incentive of ₹26 crore upfront as interest subvention for its proactive implementation of the suggestion.
