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The bonds issued by Pune Municipal Corporation were listed on the BSE on Thursday.
The corporation had raised ₹200 crore through the first tranche of the five-year bond programme to raise ₹2,264 crore.
With a top rating of AA+, the first tranche of the bonds was oversubscribed six times. The bonds offer 7.59 per cent interest, which is about 30-40 basis points more than the bonds sold by the State government. Domestic insurance pension funds and large State-owned banks invested in the Pune Municipal Corporation’s Muni Bonds.
The Government of Maharashtra gave its approval for PMC’s bond programme earlier this month. The concept of Muni bonds (municipal bonds) is making a comeback after the first such bonds were sold by Ahmedabad Municipal Corporation in 1998.
Smart Cities MissionPrime Minister Narendra Modi had urged SEBI and Department of Economic Affairs to ensure that at least 10 cities in India issue municipal bonds within one year in the context of the ‘Smart Cities Mission’.
Additionally, the Union Government has proposed to give a 2 per cent interest subsidy on the total size of the bond issue.
Both these events have been pivotal in providing an impetus to PMC’s municipal bonds programme.
The corporation intends to use the proceeds for its water metering project, which is estimated to cost about ₹3,500 crore. The project is partly self-funded by PMC and some amount will also come from the Smart Cities Mission and Atal Mission for Rejuvenation and Urban Transformation.
The debt servicing will be from user charges and property tax. The property tax will be parked in an escrow account, the designated account for repayments.
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