MUMBAI: The MMRDA is seeking a state govt guarantee to issue bonds worth Rs 14,000 crore to fund infrastructure and development projects.
The first tranche of bonds will be worth Rs 1,400 crore. Based on the outcome, the MMRDA will plan the raising of the remaining amount.
In July, the MMRDA, or the Mumbai Metropolitan Region Development Authority, received approval to raise upto Rs 50,000 crore through bonds for infrastructure projects in the city and vicinity.
These bonds, characterised as secured, rated, redeemable, and taxable non-convertible debentures (NCDs), will be backed by an unconditional and irrevocable guarantee from the state govt.
Over the past two decades, the MMRDA funded public projects by raising thousands of crores by auctioning plots in the Bandra-Kurla Complex (BKC) to developers, mainly for commercial development.
There are now only a handful of plots remaining in the BKC, forcing the MMRDA to turn to issuing bonds to raise funds.
The funds raised will primarily be allocated to enhance mobility, housing and essential services in one of the most densely populated urban areas of the country, the Mumbai Metropolitan Region (MMR).
Source said the MMRDA plans to issue the bonds on a partly paid-up basis and list these on stock exchanges after fulfilling all regulatory requirements.
Each bond, tentatively valued at Rs 1 lakh, will be secured by a mortgage of specific MMRDA-owned land parcels.
Current valuations of these land assets provide more than double the security cover required for the bonds, ensuring strong investor backing.
The state govt guarantee adds an extra layer of security, assuring bondholders of support for both principal and interest payments.
The MMRDA plans to establish an interest service reserve account (ISRA) to manage interest payments and maintain liquidity to address any unexpected developments, particularly concerning the monetisation of land assets.
Sources said the proposed debentures feature a long tenure of 50 years and include a call option allowing the MMRDA to redeem the bonds at par after 15 years of allotment, with annual redemption options thereafter.
The MMRDA strategy, leveraging both asset backing and govt support, could set a precedent for regional bodies in infrastructure financing.
“Success in this bond issuance may pave the way for new funding avenues for large-scale public projects through capital markets, potentially transforming public infrastructure financing in India,” a source said.
The MMRDA currently does not have tax revenue generation powers and plans to raise funds through land deals and monetisation of its assets, including the Metro network.
While the MMRDA anticipates positive cash flow from various revenue sources over the next 25 years, the Rs 60,000 crore loan limit and the bond funds will serve as a financial buffer in case of delays in project revenue inflows.
