Lucknow becomes first city in UP to list municipal bonds: Here's why cities need municipal bonds

Lucknow becomes first city in UP to list municipal bonds: Here's why cities need municipal bonds

In COVID times, Lucknow Municipal Corporation will progress towards achieving the ‘Aatmanirbhar’ goal with the listing of municipal bonds worth Rs 200 crore, the chief minister said


Lucknow Municipal Corporation bonds on December 2 became the first municipal bonds from North India to be listed on Bombay Stock Exchange (BSE). Uttar Pradesh Chief Minister Yogi Adityanath attended the listing ceremony in Mumbai.

The chief minister rang the bell at BSE at the listing of bonds of Lucknow Municipal Corporation.

“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 the 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,” Yogi Adityanath, chief minister of Uttar Pradesh said on the occasion.

In COVID times, Lucknow Municipal Corporation will progress towards achieving the ‘Aatmanirbhar’ goal with the listing of municipal bonds worth Rs 200 crore. The Corporation is committed to improving the lives of the citizens living in its jurisdiction, the chief minister said.

With this, Lucknow becomes the ninth city in the country to have raised municipal bonds and the first city to issue such a bond after the launch of AMRUT Scheme.

The funds raised through the bond will be invested in various infrastructure schemes in the state capital, including the water supply project and housing project being implemented under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) Scheme.

The Rs 200 crore LMC bond, which was launched on November 13, was 4.5 times oversubscribed and closed at 8.5 per cent coupon rate for 10 years, which is the second lowest rate of all the municipal bonds launched till date.

The chief minister also said that Ghaziabad municipal bonds will be listed in the next three to six months followed by Pragyaraj, Varanasi, Kanpur and Agra.

Lucknow Municipal Corporation (LMC) on November 13 raised Rs 200 crore by issuing municipal bonds on private placement basis using BSE BOND platform, the exchange said. The municipal corporation received 21 bids on BSE BOND platform for Rs 450 crore, which is 4.5 times of the issue size, BSE said in a statement.

The city of Lucknow is the ninth in the country to have raised municipal bonds that have cumulatively touched around Rs 3,600 crore. The next city to raise municipal bonds will be Ghaziabad, followed by a joint bond by Varanasi, Agra and Kanpur.

Under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme, cities have been encouraged to mobilize resources by issuing municipal bonds. These are issued when a government body wants to raise funds for infra-related projects like roads, water among others.

SEBI had circulated detailed guidelines for urban local bodies (ULBs) in 2015 to raise funds by issuing municipal bonds.

Why cities require municipal bonds to raise funding?

Municipal bonds are bonds issued by urban local bodies to raise money for financing specific projects such as infrastructure projects. The Securities and Exchange Board of India regulations (2015) regarding municipal bonds provide that, to issue such bonds, municipalities must: (i) not have negative net worth in any of the three preceding financial years, and (ii) not have defaulted in any loan repayments in the last one year.

A city’s performance in the bond market depends on its fiscal performance and one of the ways to determine a city’s financial health is through credit ratings.

Happy Investing

Source: Moneycontrol.com