India’s First: Ghaziabad Green Bond Lists On BSE Bond Platform

The Ghaziabad Municipal Corporation which raised 150 crore via municipal bonds on private placement basis using the BSE bond platform, was listed on the exchange on April 8. It opened for a subscription on March 31, 2021. The issue has seen interest from a variety of

BY Realty Plus
Published - Saturday, 10 Apr, 2021

India’s First: Ghaziabad Green Bond Lists On BSE Bond Platform

The Ghaziabad Municipal Corporation which raised 150 crore via municipal bonds on private placement basis using the BSE bond platform, was listed on the exchange on April 8. It opened for a subscription on March 31, 2021. The issue has seen interest from a variety of investors, including international investors. The coupon rate of the taxable bond was fixed at 8.1% per annum and is rated AA by India Ratings and AA(CE) by Brickworks and has a maturity of 10 years with a staggered redemption. Additionally, the company received Rs 19.5 crore incentive from the government for raising municipal bonds. The Ghaziabad Municipal Corporation (GMC) has entered into an understanding with Sahibabad Industries Association for the purpose of achieving various goals and objectives relating to water supply. The Capital raised is proposed to partially fund the tertiary sewage and water treatment plant, which is estimated to cost approximately Rs 239.93 crore. The merchant bankers to the bond issue were A.K. Capital Services Ltd and HDFC Bank Ltd. Speaking on the occasion, D S Mishra, secretary, housing and urban affairs ministry, said that listing of municipal bonds should be seen as “transformation of governance and financial structure. It is a resounding validation of good governance. “Raising Bonds is an instrument for paradigm change in urban governance. It makes cities clean up their governance and financial systems. It triggers market oriented transparent city administration and promotes self-reliance.” The coupon rate of 8.10% is the most competitive rate so far for municipal bonds in India. The issue was oversubscribed with 40 bids totalling Rs 401 crore on BSE's EBP platform. Pune, Hyderabad, Indore, Amravati, Bhopal, Visakhapatnam, Ahmedabad, Surat and Lucknow have raised the municipal bonds recently. Mishra urged other states with cities rated A+ and above to take up this transformative path. "Those cities rated below may reform their governance and financial structures to improve ratings and then go for raising Municipal Bonds," he said. “This is a momentous occasion for us. The capital raised will not only enforce financial discipline but also paves way for the Corporation for a bigger fund raising, if needed, in the future. We saw an interest of at least 40 bids attracting a total subscription of Rs 401 crore. This had come within minutes on the bid date and that too with a very competitive coupon rate of 8.10%, which is one of the lowest in Municipal Bonds in India,” said Mahender Singh Tawar, Municipal Commissioner, Ghaziabad Municipal Corporation. “This is also the first-ever green bond issued by any municipal corporation in India. This is just a reflection of trust of market in municipal bonds and good governance in the state of Uttar Pradesh,” he said. “The green bond market has immense potential and is an attractive opportunity for Indian municipalities to leverage funds for meeting clean and climate-resilient urban infrastructure targets for the nation. BSE Bond platform has helped bring in transparency and efficiency in price discovery for private placement of debt securities and the platform enables to subscribe seamlessly,” said Ashishkumar Chauhan, MD & CEO of Bombay Stock Exchange (BSE). Lucknow Municipal Corporation bonds on December 2 became the first municipal bonds from North India to be listed on Bombay Stock Exchange (BSE). Uttar Pradesh Chief Minister Yogi Adityanath attended the listing ceremony in Mumbai. The next cities to raise municipal bonds will be Benaras, Agra and Kanpur. Under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme, cities have been encouraged to mobilise resources by issuing municipal bonds. These are issued when a government body wants to raise funds for infra-related projects like roads, water among others. SEBI had circulated detailed guidelines for urban local bodies (ULBs) in 2015 to raise funds by issuing municipal bonds.