Lucknow became the ninth city in the country to have raised money through municipal bonds listed with the stock exchange in the country.
The Lucknow Municipal Corporation (LMC) listed bonds worth ₹200 crores with Bombay Stock Exchange (BSE) on Thursday (December 3).
Municipal bonds are essentially bonds issued by the local authorities in order to raise funds from investors by means of a stock market. Investors are expected to invest in the long term and they periodically get the interest as returns.
Ahmedabad, Amaravati, Vishakhapatnam, Surat, Bhopal, Indore, Pune and Hyderabad are other cities that have opted for municipal bonds.
Lucknow became the ninth in the list and will be followed by Ghaziabad and Prayagraj in the next few months. LMC will be spending the raised money on water supply and housing projects conceived by the Government of India.
Ahmedabad was the first city to raise money through this instrument. It had issued bonds worth ₹100 crores in 1998 to fund infrastructure projects in the city. The city has raised another ₹200 crores in 2019 via the same instrument.
Pune Municipal Corporation (PMC) was the second to use bonds after almost one and half decades in 2017. It had issued bonds of ₹200 crores which got an overwhelming response from investors.
PMC was planning to use these funds for projects under the Smart City scheme, especially one to provide round-the-clock water supply to residents.
Later, Indore raised ₹140 crores and was followed by Bhopal within next three months, which issued ₹175 crores bonds. The funds were used to implement the AMRUT scheme of the central government.
Amaravati Bond 2018 was the municipal bond that raised the highest amount of ₹2,000 crores via this method. These bonds were issued by the Andhra Pradesh government to raise money to build the capital city of Amaravati under the previous TDP government. This was a pet project of a former chief minister Chandrababu Naidu. The bonds listed with BSE received one of the highest coupon rates (interest rate) of 10.32%.
Along with these, Vishakhapatnam (or Vizag) was another southern city to use the instrument of municipal bonds for fundraising. The city had issued bonds worth Rs.80 crores in August 2018.
Surat was eighth city that followed the suit of Ahmedabad in 2019. The city raised the amount of Rs.200 crores while listing bonds with BSE in February 2019. The money will be used to improve its civic amenities, informed the city officials.