PMC Raises Rs 200 Cr By Selling Bonds To Invest It In Water Project

The Pune Municipal Corporation (PMC) has raised Rs 200 crore by selling 10-year bonds. say media reports. Proceeds from the issue, says the municipal body, will be used for a Rs 2,300-crore water project in the city.

Earlier, the PMC had provided investors, who go by the ancient axiom that one should put one's money only in secure options, with a great opportunity by issuing the country's biggest municipal bond issue so far.

For the uninitiated, bonds are a form of debt that corporations and government bodies take from investors, the former to expand their market and the latter to fund infrastructure and other social projects. By putting his money into bonds, a common man can become an investor by lending to government bodies and companies. For that, he will earn interest payments at a fixed rate and time period. For instance, if you invested Rs 1,000 (this amount is known as face value) in a government bond at an interest rate (known as coupon) of eight per cent for a period of 10 years (also known as maturity date), you will earn Rs 80 every year. When the bond matures, you will get back your Rs 1,000.

Here are things to know about  the PMC's issue:

• At Rs 2,300 crore,  the Pune municipal body's bond issue was India's largest municipal bond issue till date. In the past two decades, 30 municipalities across India raised a total of Rs 1,353 crore via taxable bonds, tax-free bonds and pooled financing. So far, the biggest bond offering has been the Bangalore Municipal Corporation's (BMC) Rs 125-crore bond issue in 1997. While BMC's bond issue was guaranteed by the state government, the PMC issue has not been guaranteed by the state government.

• The PMC's issue was privately placed with both foreign and domestic investors.

• The PMC has a long-term credit rating of 'AA+'. It is worth mentioning here that the number of municipalities in India that are rated AA and above is quite low.

The PMC, which earns a bulk of its revenues from property and other local taxes, is the second-largest corporation in Maharashtra, after the Brihanmumbai Municipal Corporation, also India's biggest such body. The PMC's revenue surplus rose 18.5 per cent to Rs 2,000 crore in 2015-16.  Keeping that in mind, it is safe to say that the PMC bond will get a warm response. 

Also read: Pune Realty Can Be A Goldmine For Long-Term Investors