Bonds bring in funds for GHMC

Thu 22 Aug 2019, 12:06:54
The Greater Hyderabad Municipal Corporation (GHMC) issued the third tranche of Rs 100 crore on Tuesday, thus becoming the largest municipal bond route utiliser for generating funds in the country.

GHMC had previously raised Rs 395 crore in two tranches of Rs 200 crore and Rs 195 crore through issue of municipal bonds in February 2018 and August 2018 respectively. The third tranche was opened for bidding today and evoked a good response from capital market investors. The corporation has decided to retain the total bids of Rs 100 crore at a coupon rate of 10.23 per cent.

GHMC will also become the largest recipient of the incentive from the Ministry of Housing & Urban Affairs, totaling Rs 39 crore, including this issue. This brought down the borrowing cost of GHMC to 8.93 per cent per annum, showing the financial prudency of the organisation. 

During the 2019-20 financial year, GHMC with AA rating was the first organisation both among private and government undertakings to issue bonds. Only AAA rated organisations have raised bonds this year till date, GHMC officials said.

These funds will be exclusively used for the Strategic Road Development Programme (SRDP) under which flyovers, underpasses and other structures are being constructed in the city. In an effort to finance this project partly, the Telangana government had decided to issue municipal bonds. GHMC now accounts for almost 15 per cent market share of municipal bonds.

After the bidding, Mayor Bonthu Rammohan announced that the corporation was planning to raise another Rs 200 crore through issue of bonds in a couple of months. Trading was completed well in advance than the time allocated for GHMC as financial institutions participated in good numbers, he said, adding that despite the prevailing market situation, GHMC raising Rs 100 crore well within one hour, indicated the financial stability of the municipal corporation and the confidence of the investors.

"Initially, we had decided to go for Rs 300 crore but due to the current market scenario, we were content with Rs 100 crore for this time," said Rammohan. The corporation will have to pay interest for the amount generated for every six months and the entire principal amount can be repaid in 10 years, he said.

Due to the financial constraints faced by many municipal corporations in the country not many dared to issue municipal bonds but GHMC took the brave step. The Central government also appreciated the initiative taken by GHMC, he added.

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