UP Govt’s first 200 cr Lucknow municipal bond lists on BSE

  • Lucknow Municipal Corporation, which raised Rs 200 crore via municipal bonds on a private placement basis using the BSE bond platform listed on the exchange

  • 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

New Delhi/Mumbai: The Lucknow Municipal Corporation, which raised Rs 200 crore via municipal bonds on a private placement basis using the BSE bond platform listed on the exchange Wednesday. It received 21 bids and subscribed by 4.5 times. The corporation received bids for an Issue size of Rs 200 crore within 60 seconds of the issue opening, which opened for subscription on November 13, 2020.  It’s one of the eight cities in India that have capitalized on the new guidelines to fund the AMRUT and Smart Cities Mission to raise an aggregate of 3,690 crores as per government released data.

The capital raised is proposed to partially fund the AMRUT projects and other infrastructure projects which had an earmarked requirement of INR 3,109.5 mn. 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 instalments from 4th and 10th year.

The coupon rate of the taxable bond was fixed at 8.5 percent per annum. The actual cost of borrowing will be approx. 7.25 percent after considering Rs 26 crore incentive from the government of India for raising municipal bonds.

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Speaking on this momentous occasion, Chief Minister of Uttar Pradesh Yogi Adityanath stated “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. It will augment 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.”

On the occasion of the listing of the bonds, Bombay Stock Exchange’s (BSE) MD & CEO Ashish Kumar Chauhan stated “I would like to congratulate Lucknow Municipal Corporation for successfully raising Rs 200 crore by issuing Municipal Bond on BSE Bond platform. 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. BSE firmly believes that the Indian bond market has the potential for substantial growth. BSE Bond platform has helped bring in transparency and efficiency in price discovery for a private placement of debt securities and the platform enables to subscribe seamlessly.”

On the global market of municipal bonds and its opportunities in India, AK Capital’s MD & CEO AK Mittal stated “a big congratulation to Lucknow Municipal Corporation for raising Rs 200 crores at historically low rates. I feel proud to say that AK Capital has been a leading merchant banker in the municipal bonds space in terms of volumes. Lucknow Municipal Corporation bonds are backed by a 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.”

The Merchant bankers to the bond issue were AK Capital Services Ltd and HDFC Bank Ltd.

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