Issue receives bids of Rs 1,085 cr, over 10 times the basic issue size of Rs 100 cr
The Ahmedabad Municipal Corporation (AMC) successfully raised Rs200 crore from the bond on Friday, the civic body said.
AMC's bond issue of Rs100 crore, with the green shoe option to retain over-subscription of a further Rs100 crore, opened this morning and was fully subscribed in two minutes. AMC said that issue of the AA+ rated bonds, with a maturity of five years, received bids from all categories of investors such as banks, primary dealers, pension funds, and other financial institutions.
"The bond issue received total bids of Rs1,085 crore, i.e. more than ten times the issue size. The issue has created history, as it is the highest ever over-subscription received by any municipal corporation in the country," Ahmedabad municipal commissioner Vijay Nehra, said. He said the AMC will be eligible for getting additional grants from the Centre for having raised money through the market.
The funds raised would be used to finance 24x7 water supply, sewage treatment plants for Sabarmati pollution control, and other projects under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme, said officials.
Nehra did not specify the coupon rate at which the money was raised but said the pricing was very competitive.
However, investment banking sources said that AMC raised the funds at an interest rate of 8.70%, payable on a half-yearly basis, and claimed it was a competitive price given the fact that it is an unsecured instrument, and also because of the perception issues faced by municipal bodies and their finances.
The bonds were issued as taxable, listed, and unsecured non-convertible debentures.
This is the fifth time that AMC tapped the bond market. The first time was in 1998 when it became the first municipal body in entire South East Asia to do so. Its last issue was in 2005. Recently, Pune, Indore and Bhopal have raised funds through municipal bonds, while Surat is expected to be the next one by March.
A senior official of Surat Municipal Corporation said that they too plan to raise Rs200 crore through the bond market. "We are awaiting approval from the state and central governments," he said.
RAISING FUNDS
- AMC’s bond issue has created history, as it is the highest ever over-subscription received by any municipal corporation in the country,” AMC commissioner Vijay Nehra.
- Funds would be used for 24x7 water supply, sewage treatment plants for Sabarmati pollution control, and other projects under AMRUT scheme.
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