The civic bodies of Nashik, Visakhapatnam, Kanpur, Surat, Varanasi, and Prayagraj are likely to tap the bond market by issuing municipal bonds by July, people familiar with the matter said.
These bonds could carry a coupon of 7.9-8.3%. “The quantum of the fundraise could be anywhere between ₹100 crore and ₹300 crore,” a person familiar with the plans said.
Municipal bodies have raised nearly Rs 3,000 crore from the bond market between 2017 and March 2024. Those that have raised funds this way include Ahmedabad, Bhopal, Indore, Pune, Lucknow, and Hyderabad. These funds are used for building infrastructure projects within the city.
Recently, the Vadodara Municipal Corporation (VMC) raised ₹100 crore by issuing Certified Green Municipal Bonds for Sustainable Water Infrastructure. The proceeds are being used to build and enhance liquid wastewater management infrastructure across the city.
Last year, Indore Municipal Corporation had raised the first public issue where retail investors could participate, raising ₹244 crore. It was done to build a solar power project.
Currently, most investors in municipal bonds are institutional in nature. Madhabi Puri Buch, chairperson of market regulator Sebi, recently said the total opportunity of such bonds could be one time the size of India’s gross domestic product.
