Hyderabad to float third tranche of municipal bonds to fund construction projects

20 Aug 2019 Editorial Team

The Greater Hyderabad Municipal Corporation (GHMC) is set to float the third tranche of municipal bonds for Rs 3.05 billion on August 20. The funds generated from the bonds will be used to execute the Strategic Road Development Plan (SRDP), which deals with the construction of flyovers, grade separators and underpasses.

The bidding will be, reportedly, be carried out on the e-bidding platform of Bombay Stock Exchange (BSE), with an issue size of Rs 2.05 billion with a greenshoe option of an additional Rs 1 billion. The amount which is being raised in turn, for the SRDP construction work will aid in minimising traffic congestion, reduce travel time and fuel consumption, while also bringing down pollution levels in the city. GHMC expects to collect a total of Rs 10 billion in a phase-wise manner from the bond market with a maturity period of 10 years.

As reported, the corporation preferred to issue municipal bonds over Rupee Term Loan (RTL), even though the share market has wildly fluctuated these past few weeks, due to the additional financial incentives offered by the Ministry of Housing and Urban Affairs (MoHUA) for 2019-2020. This incentive will provide GHMC with a total of Rs 0.26 billion, at a rate of Rs 0.13 billion per Rs 1 billion of bonds issued. This will be capped at Rs 2.5 billion, without an incentive of approximate Rs 0.13 billion for the other Rs 1.5 billion.

In the past, GHMC raised roughly Rs 3.95 billion through municipal bonds in two tranches. These funds were utilised for further construction of skyways, major corridors and flyovers under SRDP. The corporation aims to complete the work on these projects by the funds acquired in the third tranche.

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