VIJAYAWADA: In what could be a shot in the arm to the State government, the bonds issued by the AP Capital Region Development Authority (APCRDA) on Tuesday to mobilise funds for the construction of Amaravati received an overwhelming response from investors. The bonds, Amaravati Bonds-2018, were oversubscribed by 1.53 times as institutional investors queued up to buy bonds worth Rs 2,000 crore against the basic issue size of Rs 1,300 crore.
As the response exceeded expectations, the APCRDA is now in the process of floating retail and rupee bonds for raising monies. In total, the authority plans to mobilise up to Rs 10,000 crore through various bonds for the capital’s construction.
The authority termed the issuance ‘the biggest ever in the country since Independence’ by an urban local body. “We released bonds worth Rs 1,300 crore. By the time bidding was closed, we got a subscription of Rs 2,000 crore. In the entire market, bonds floated by other municipalities add up to just Rs 1,800 crore. Amaravati, the only greenfield capital in the country to have floated bonds, has attracted Rs 2,000 crore investments by itself,” APCRDA Commissioner Cherukuri Sreedhar said.
Buoyed by the response, the authority is in the process of issuing retail bonds. Speaking to TNIE, the Special Commissioner of CRDA, V Rama Manohara Rao, said, “We have been getting multiple requests from the public, which wants to buy the bonds. We are working on the structure of the bonds. We will gauge the response once again and issue the bonds in three to four months.” The authority has plans to pool Rs 1,000 crore to Rs 3,000 crore through retail bonds. It is also preparing the ground for issuing Rupee Bonds in London Stock Exchange, New York Stock Exchange and Singapore Stock Exchange among others.
The special commissioner further noted that the authority would be able to tap funds immediately. “Since we announced the Greenshoe option of Rs 700 crore, we will take a call shortly on whether or not we need to exercise it. Once we decide and let the investors know, they will have to deposit the money into our accounts by the next working day of the markets, as per Securities and Exchange Board of India (SEBI),” he added.
While the CRDA appears to be happy with the response, experts raised a red flag on to how the already-cash-strapped-government would be able to service the debt. “The point to ponder is why the State government, which can avail loans from central institutions like RBI for an interest rate of 6-6.5 per cent, is going for raising funds by paying high interests. How the State government, which already borrowed huge loans in the last four years, will service the debt is the question,” observed former Chief Secretary IYR Krishna Rao.
He added that the GHMC bonds issued recently were subscribed for an interest rate of 8.9 per cent, and last year’s Pune Municipal Bonds at 7.59 per cent. “Besides the high-interest rate, a commission of Rs 17 crore is being paid to the arranger. I don’t understand how this is profitable,” he remarked However, CRDA officials defended the issuance of bond. “Bonds, unlike banks, don’t need security and the process of getting funds is 15 to 30 days. Secondly, if we wait for a few more years for issuing bonds at lower interest rates, there will be an overrun in the project cost due to the delay which will further burden the exchequer,” said a senior official.