By Dominick Rodrigues
Mumbai, Dec 2: The Uttar Pradesh Chief Minister Yogi Adityanath today said that the State has entered a ‘new era’ of social development with the newly-listed Lucknow Municipal Corporation Bond issue highlighting the roadway for similar development in other parts of UP, while also facilitating better services in the Covid-19 situation.
The Chief Minister was addressing a gathering here after “ringing the gong’ at the virtual listing ceremony of the Lucknow Municipal Corporation (LMC) Bond issue 2020 at the Bombay Stock Exchange today.
Describing Uttar Pradesh as the country’s third biggest State, the Chief Minister said that the LMC Bonds issue is a ‘momentous’ occasion that is heralding beginning of a ‘new age” in social development including improving facilities for the common man. “The LMC is the first such body in North India to issue bonds and the Prime Minister Narendra Modi too had highlighted plans for issuing these bonds from four other cities — Kanpur, Agra, Varanasi and Prayagraj — to meet the needs of around 700 urban bodies servicing an eight-crore population, he said.
“It is a matter of pride for UP that the Lucknow Municipal Corporation has raised Rs 200 crore through its bond issue, which got listed on BSE today. It is the trust of the investors which UP has earned during last three and a half years of governance, besides augmenting our effort to improve infrastructure in urban areas, and it shows the improvement in the Industrial climate of the state and the trust the investors have reposed in the state machinery,” he added.
Congratulating the LMC for successfully raising Rs 200 Crore by issuing Municipal Bonds on the BSE Bond platform, Ashish Kumar Chauhan, MD & CEO of Bombay Stock Exchange, said “The fact, that the order book was filled more than double in a matter of few minutes, establishes Lucknow Municipal Corporation as a credible entity in the Indian bond market.”
“The Bombay Stock Exchange has created wealth amounting to Rs 2.3 Trillion, which included 11 municipal bonds being issued from here itself. The BSE firmly believes that the Indian bond market has a potential for substantial growth and the BSE Bond platform has helped bring in transparency and efficiency in price discovery for private placement of debt securities in which the platform enables to subscribe seamlessly,” he said.
On the Global Market of Municipal Bonds and its opportunities in India – Mr A.K. Mittal, MD & CEO, A. K. Capital, stated “A big congratulation to Lucknow Municipal Corporation for raising Rs.200 crores at historical low rates. I feel proud to say that A.K. Capital has been a leading Merchant Banker in the Municipal Bonds space in terms of volumes. Lucknow Municipal Corporation bonds are backed by strong-structured payment mechanism, making it a secured investment with an attractive return for the investors. Indian Municipal Bond market is at a very nascent stage compared to the US Municipal Bond market, but given the rapid pace of urbanisation, it is going to play a pivotal role in shaping the urban infrastructure sector in the country.”
Detailing the LMC bond issue’s three-year transformation journey from an A minus rating to a more positive rating at present with the issue coming out at Rs 200 crores and being subscribed 4.5 times on the BSE, he said “We are hoping that further bond issues coming out from other cities in Uttar Pradesh like Kanpur, Agra, Varanasi and Prayagraj also draw increased customer confidence.”
The Lucknow Municipal Corporation had raised Rs 200 crores via Municipal Bonds on private placement basis, using the BSE bond platform listed on the exchange today. It received 21 bids and was subscribed 4.5 times. The LMC received bids for the issue size of Rs 200 crores — within 60 seconds of the issue opening for subscription on November 13, 2020. Lucknow is one of the 8 cities in India, that have capitalized on the new guidelines to fund the ‘AMRUT’ project and +Smart Cities Mission+ to raise an aggregate of Rs 3,690 crores, as per government data.
The capital raised is proposed to partially fund the ‘AMRUT’ project and other infrastructure projects, which have an earmarked requirement of Rs 3,109.5 million. The AA Stable and AA (CE) Stable-rated bonds by India and Brickwork Ratings have a tenure of 10 years and states that the principal amount will be paid in 7 installments from 4th and 10th year.
The coupon rate of the taxable bond was fixed at 8.5% per annum. The actual cost of borrowing will be approx. 7.25%, after considering Rs 26 crores incentive from the Government of India for raising Municipal Bonds. The Merchant bankers to the bond issue are A.K. Capital Services.
