THE VADODARA Municipal Corporation (VMC) will issue bonds to raise money to fund development works sanctioned under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), in the city by January 2021, officials said.
The cash-strapped civic body has been finding it difficult to execute the works under AMRUT since over a year. After favourable credit ratings from two agencies, it is now readying a proposal for seeking approval of the state government.
In its the budget for 2019-20 financial year (FY), the VMC General Board had given in-principal approval for mobilisation of Rs 100 crore through issuance of Municipal Bond under AMRUT scheme, which was raised to Rs 200 crore in the FY 2020-21.
Under the AMRUT project, the VMC has got approval for its Detailed Project Report (DPR) of 14 works worth Rs 474.34 crore. Tender value for these works is Rs 533.40 crore of which the VMC has to contribute approximately Rs 224.4 crore. As per the approval of the General Board, the civic body has to raise Rs 100 crore through Municipal Bonds for the gap funding of its contribution in the AMRUT scheme.
The VMC has already sought the approval of its Standing Committee and appointed various agencies and intermediaries, like transaction advisor, credit rating agencies, legal counsel, chartered accountant firms among others, necessary for the issuance of the bond, officials said.
“The VMC has already finalised its balance sheet of the last five financial years as per the National Municipal Accounting Manual and Accrual Base Double Entry System and got it audited and certified by an independent chartered accountant, which is a pre-requisite for the issuance of the bond. It was also mandatory to have a credit rating from two reported agencies for the issuance of the Municipal Bond,” Santosh Tiwari, the chief accountant at VMC, said.
The VMC had appointed India Rating and Research (Fitch) Ltd and CRISIL Ltd for the credit rating. While Fitch assigned AA+/Stable, CRISIL ratings for VMC are AA/Stable.
The VMC has also appointed SBI Capital Markets Ltd and MV Kini Law Firm, New Delhi, as the transaction advisers and legal counsel for the proposed bond. SBI Capital Markets Ltd is mainly responsible to coordinate, assist and guide various stakeholders and hold investor meetings to mobilise the proposed sum.
Tiwari said, “Preparation for information memorandum along with due diligence report, which has to be filed in the SEBI by transaction advisers are under process and it will be finalised by the law firm. The state government’s approval is needed for the mobilisation of the funds through Municipal Bonds and for that, the VMC would be sending its proposal along with the latest finalised balance sheets, credit ratings and documents to the government. As soon as the state government approves, other agencies like a trustee, registrar cum transfer agents, exchanges, and depository will be appointed to render their services.”
The VMC is hoping to float its Municipal Bond and mobilise Rs 100 crore by January 2021. “We will go for mobilising the other Rs 100 crore once the first issue is successfully subscribed,” Tiwari said.
Meanwhile, the United States Treasury Department will provide VMC with the technical assistance and guidance for proposed Municipal Bond under the India-US Economic and Financial Partnership programme.
The Ministry of Housing and Urban Affairs has signed an MoU with the US for the same. Other cities selected for similar assistance from the US Treasury are Rajkot, Mysore, Mangalore, Pimpri-Chinchwad and Faridabad.
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