By July 2024, the municipal bodies of Nashik, Visakhapatnam, Kanpur, Surat, Varanasi, and Prayagraj are expected to issue municipal bonds, aiming to raise between INR 100-300 crore each at a coupon rate of 7.9-8.3%. Over the past seven years, municipal bodies have collectively raised nearly INR 3,000 crore from the bond market. This move signifies a growing trend of urban local bodies leveraging the bond market to fund their development projects and infrastructure improvements. Recently, Vadodara Municipal Corporation raised INR. 100 crore through Green Municipal Bonds for wastewater management.
Nashik, Visakhapatnam, Kanpur, Surat, Varanasi, and Prayagraj are preparing to look into the municipal bond market by July, according to sources familiar with the developments. These bonds are anticipated to offer a coupon rate ranging between 7.9% and 8.3%. The fundraising efforts are expected to vary between INR.100 crore and INR.300 crore.
Since 2017, municipal bodies across India have successfully raised nearly INR.3,000 crore through the bond market until March 2024. Cities such as Ahmedabad, Bhopal, Indore, Pune, Lucknow, and Hyderabad have previously leveraged this method to finance various infrastructure projects. These funds have been instrumental in enhancing city infrastructure, reflecting the growing trend among municipalities to seek market-based financing solutions.
In a recent instance, the Vadodara Municipal Corporation (VMC) raised INR.100 crore through Certified Green Municipal Bonds. The proceeds from these bonds are dedicated to developing sustainable water infrastructure, particularly in enhancing the city's liquid wastewater management systems.
Indore Municipal Corporation set a precedent last year by raising INR.244 crore through the first public municipal bond issue available to retail investors. The funds raised were allocated for the construction of a solar power project. Typically, municipal bonds in India have attracted institutional investors, but the Indore initiative marked a significant shift by including retail participation.
Madhabi Puri Buch, chairperson of the Securities and Exchange Board of India (SEBI), has highlighted the immense potential of the municipal bond market. She stated that the total opportunity in this sector could equate to the size of India's gross domestic product.
The move by Nashik, Visakhapatnam, Kanpur, Surat, Varanasi, and Prayagraj to enter the bond market highlights the growing confidence in municipal bonds as a viable financing tool for urban development. As cities increasingly seek innovative funding solutions, municipal bonds are set to play a crucial role in transforming India's urban infrastructure landscape.
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