Pimpri Chinchwad civic body to raise Rs 200 crore via maiden municipal bonds

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Pimpri Chinchwad Municipal Corporation, the Pune-based civic body in charge of the city and surrounding regions such as Pimpri, Chinchwad and Akurdi, is planning to raise Rs 200 crore through its maiden municipal bonds issue by March and intends to use the funds garnered for development works, corporation officials told Moneycontrol on January 12.

This would be the first municipal bonds by any authority in the current financial year.

"We are planning to come up with the maiden municipal bond issue maybe between January and March," a senior official from the corporation said on condition of anonymity.

A municipal bond is a debt instrument issued by a municipal corporation under municipal laws with the permission of the respective state government.

The tenure for the bonds has not been fixed yet, and officials said they are in talks with the merchant bankers and investors.

Also read: Public issue of municipal bonds to help issuers increase investor base: Experts

"Depending on the response, we may decide the tenure. It will probably be three-year, five-year or seven-year bonds," the official cited above added.

“We are seeking approval from the state government and accordingly we have sent documents and further details,” the official said.

The corporation has appointed SBI Capital Markets as one of the merchant bakers for the issue.

The bonds have been rated ‘AA’ with ‘Stable’ outlook by CRISIL and Care Ratings.

The corporation will use the proceeds for a riverfront development project, among other things.

According to the Reserve Bank of India’s report on municipal finances, since 2017, bond issuances by corporations have increased steadily. As per the report, such corporations raised Rs 3,840 crore between 2017 and 2021.

However, in the larger scheme of things, the overall borrowings by municipal corporations is minuscule and their market borrowings through bond issuances is negligible, dominated as it is by a few large corporations.

In the last few years, a renewed thrust from the Centre through schemes like AMRUT (Atal Mission for Rejuvenation and Urban Transformation) has led to fresh issuances of bonds by nine municipal corporations.

"Recent instances of bond issuances have demonstrated that bond financing can be a viable alternative for raising resources for municipal corporations," the Reserve Bank of India said in a report.