New Delhi: The Indore Municipal Corporation’s (IMC) first green bonds have been oversubscribed by 5.90 times after raising about Rs 720 crore as of 5 pm Tuesday — the last date for application for the bonds. The issue was opened for subscription from 10 to 14 February.
The civic body had planned to raise approximately Rs 244 crore through the sale of these bonds for installation and operation of a solar power plant of 60 megawatts at Madhya Pradesh’s Samraj and Ashukhedi villages in Khargone district. It is expected to be the largest solar plant meant for pumping and supplying water from Narmada.
Green bonds are debt securities issued by a public or private organisation to finance or refinance projects that have a positive impact on the environment. Uttar Pradesh’s civic body Ghaziabad Nagar Nigam (GNN) had issued India’s first green municipal bond for setting up of a ‘tertiary water treatment plant’.
“The solar power project is going to be funded, but more importantly, this is going to pave the way for more such (green) projects and explore innovative financing methods to fund them,” Pratibha Pal, IMC Commissioner, told ThePrint.
The civic body was hoping for 10 to 15 times oversubscription of its bonds against the 1.26 times witnessed in 2018 — when Indore became the first city to list municipal bonds on the National Stock Exchange’s (NSE) debt securities platform.
Oversubscription is a term used when demand for new stock is greater than the number of shares actually available.
On the first day, the green bond attracted bids worth Rs 661.52 crore and was oversubscribed by 5.42 times.
“There are several reasons for such an overwhelming response, including the urban local bodies for the first time in India issuing green bonds and the type of project we are opting for. Now, a solar power plant is going to help the corporation reduce its recurring expenditure. But most important is the timing. The opening for the issue was just after the budget, and in it, municipal bonds were given huge importance,” said the commissioner.
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Why did IMC issue green bonds?
IMC’s credibility that was established since the success of Swachhata campaign, its previous experience with municipal bonds, its annual revenue and “the faith of Indorians” — about 70 per cent of whom pay advance taxes — led the civic body to issue green bonds.
Though the solar plant is estimated to cost Rs 305 crore, the rest will be covered through government subsidies, such as viability gap funding from the Ministry of Renewable Energy to the tune of approximately Rs 42 crore and Rs 20 crore by Ministry of Housing and Urban Affairs under AMRUT 2.0 (An incentive of Rs 10 crore will be given for every Rs 100 crore of green bonds per urban local body.)
The bonds or ‘Non-Convertible Debentures’ (NCD) have a rating of AA-plus from credit rating agency India Ratings and Research, which is termed as the second best in terms of financial strength, and is an improvement from AA that was given to IMC in 2018.
These bonds are being issued at the minimum bid of Rs 1,000 that have four separately transferable and redeemable principal parts (STRPP) with each STRPP costing Rs 250.
The total issue size or the money expected to be raised for the project is adding up to Rs 244 crore, with a base issue of Rs 122 core and an option to retain oversubscription up to another Rs 122 crore. IMC has to pay an interest of 8.25 per cent per annum on these bonds payable half yearly. Their maturity is between three and nine years.
(Edited by Richa Mishra)
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