CHENNAI: The Greater Chennai Corporation (GCC) became the first municipal corporation in Tamil Nadu to raise funds for infrastructure projects through bonds as it listed municipal bonds worth Rs 200 crore on the National Stock Exchange (NSE) on Monday.
Government sources said the bond has been received well by the market with the bidding being oversubscribed 4.21 times at Rs 421 crore.
Chief Minister M K Stalin presided over the bell ceremony to mark the listing of the bond at an event held at Kalaivanar Arangam in Chennai.
The funds raised would be spent on the Integrated Stormwater Drainage Project in the Kosasthalaiyar Basin.
NSE chief economist Tirthankar Patnaik said that three more TN municipal corporations —Coimbatore, Tiruppur, and Tiruchy— were also in the process of raising Rs 100 crore each via municipal bonds.
GCC’s municipal bonds got AA+ in India, Acuité ratings
The GCC has raised Rs 200 crore through these bonds at an interest rate of 7.97% per annum over a 10-year tenure. The bidding took place on May 20. With this, Chennai joined the ranks of around 17 municipal corporations, including Hyderabad, Indore, Pune and Ahmedabad, which have already listed their municipal bonds on the NSE.
“It is always a delight for us at NSE when urban local bodies make use of capital markets as an alternative means of financing,” Patnaik said. “It’s a pleasure to note that the GCC’s Rs 100 crore-bond offering was well-subscribed. The additional Rs 100 crore green shoe option also saw overall demand of over Rs 421 crore,” he said.
The GCC’s municipal bonds have received a credit rating of AA+ from both India Ratings and Acuité Ratings. To support the GCC’s fundraising efforts and boost investor confidence, the TN government has provided assistance under the Project Sustainability Grant Fund scheme.
GCC Commissioner J Kumaragurubaran said as the next step, the corporation is planning to issue municipal bonds to fund the multi-modal facility at the Broadway bus terminus, a project estimated to cost Rs 822 crore. Of the required fund, the GCC will contribute Rs 570 crore, and the rest Rs 500 crore will be raised through bonds.
He added if the corporation were to secure a loan from banks, it would have to pay an interest rate of around 8.75% to 8.9%. Through municipal bonds, the interest rate is lower at 7.97%. Also, the centre provides an incentive of Rs 13 crore for every Rs 100 crore raised through bonds to urban local bodies (ULBs). The GCC will receive Rs 26 crore as incentive from the union government under the AMRUT 2.0 scheme for the Rs 200 crore raised, the commissioner said.
GCC Deputy Commissioner (Revenue and Finance) M Birathiviraj told TNIE, “The GCC will aim to raise more funds through municipal bonds for revenue-generating projects. This method of funding can be adopted frequently in the future as it has been implemented now with due diligence.”