Lucknow raises Rs 200 cr on BSE muni bond listing; more UP cities to follow

Ghaziabad, Pragyaraj, Varanasi, Agra and Kanpur to issue bonds next, says Yogi Adityanath.

Bonds issued by the Lucknow Municipal Corporation (LMC) listed on the BSE on Wednesday, raising Rs 200 crore for Uttar Pradesh's capital. It’s the ninth city in the country to raise capital through municipal bonds.

UP Chief Minister Yogi Adityanath, who rang the ceremonial bell to mark the listing, said Ghaziabad will be the next to issue a municipal issue and it will be followed by Pragyaraj, Varanasi, Agra and Kanpur.

LMC’s bond issuance, launched on November 13, offered coupon of 8.5 per cent and had tenure of 10 years. The issuance had garnered 4.5 times subscription.

Adityanath urged the state’s micro, small and medium enterprises (MSME) make use of the stock exchange platform to raise equity capital to fuel their business growth. Adityanath, who is on a two-day visit to Mumbai, met with investors and filmmakers.

As many as 15 units have taken steps to meet their working capital and financial needs by listing on the BSE, he said.

“The policies of the UP government are investment-oriented. We are striving for simplicity and ease of doing business for investors. In recent times, due to the single window system, the needs and expectations of investors are being addressed,” the CM said after participating in the traditional ‘ringing bell ceremony’ to release the Lucknow Municipal Corporation (LMC) bond, thus making Lucknow the first city in Northern India to achieve the feat.

He described the listing of the bond as ‘the starting of a new era’ in the history of the state. “The listing of the bond totalling Rs 200 crore is a step forward on the path of self-reliance. Uttar Pradesh will play a pivotal role in fulfilling the Aatmanirbhar Bharat commitment of the Prime Minister (Narendra Modi).”

The actual cost of borrowing for LMC works out to about 7.25 per cent after considering Rs 26 crore incentive from the Centre for raising the bond. The LMC bond were rated AA Stable and AA (CE) stable by Brickwork Ratings.

Until now, a cumulative amount of Rs 3,600 crore has been raised via muni bonds in the country. The money raised using such bonds is typically used for infra projects such as roads, water and housing.

In 2015, market regulator Sebi had issued the framework for raising capital by way of muni bonds. Among the key eligibility criteria for issuing these bonds is that the local body shouldn’t have negative net worth in any of the three preceding financial years and shouldn’t have defaulted on payments in the last one year.