Explained: Rs 200 crore Lucknow municipal bonds

The Rs 200 crore municipal bonds issue of the Lucknow Municipal Corporation was listed at Bombay Stock Exchange today in the presence of Uttar Pradesh Chief Minister Yogi Adityanath. Here are some things you should know about the bonds. 

* Lucknow has become the 9th city in the country to have raised municipal bonds, which has been incentivized by the Centre under the mission AMRUT (Atal Mission for Rejuvenation and Urban Transformation).

* This is the first municipal bond issue from North India and the first from Uttar Pradesh after the launch of the AMRUT scheme. This bond issue from Lucknow Municipal Corporation is rated ‘AA’ by India Ratings and ‘AA (CE)’ by Brickwork Ratings.

* The proceeds of the issue are proposed to be invested in a water supply project being implemented under AMRUT scheme of the Government of India and a housing project.

* The bonds issue will ensure that the LMC will get Rs 26 cr to subsidise its interest burden. This upfront incentive amount equates to reducing interest burden by 2% on the municipal corporation. It will help in improving financial & municipal governance, make city move on the path of self dependence and provide necessary support for developing civic infrastructure.

* The total issue of Rs 100 crores (including green shoe option of up to Rs 100 crores) attracted considerable investor interest and received bids totaling to Rs 450 crores from 21 investors. It closed at a very attractive coupon rate of 8.5% for a ten-year bond, which is a record, particularly in times of COVID and is reflective of the investor demand

* The tenure of the Lucknow Municipal Corporation bond is 10 years and it is structured as a ‘strip’ bond with 7 STRRPs (A to G) and principal repayment to happen in 7 equal annual payments from the 4th year to the 10th year.
 

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