Rs 235cr Bond Float By Delhi Plan Board Issues Rs 235cr Bonds

The National Captial Region Planning Board (NCRPB) has hit the debt market with a Rs 235 crore issue . The issue is being made on a private placement basis.

The accruals from the issue will be used to fund land acquisition in Haryana, Uttar Pradesh and Rajasthan and for implementing projects in these regions. These projects include urban infrastructure projects.

The issue comes in two components a tax free component of Rs 50 crore plus a green shoe option of Rs 35 crore and a taxable component of Rs 150 crore. The tax-free component has a coupon of a 10.5 per cent with a possible front-end discount of up to 2.5 per cent. The taxable component is priced at 14 per cent without a front-end discount.

The tenor of bond is 7 years, but it carries an exit option at the end of five years. Accordingly the yield to maturity on the taxable bonds works to about 14.76 per cent, inclusive of the interest on application money. On the tax-free bonds, the YTM works to about 11.74 per cent. The issue is being done through a book building process. RR Financial Consultants have been appointed as the lead book runners for the issue.

Since the NCRPB is new body without any revenue flows, a credit enhancement mechanism has been built into the issue through a specific guarantee from the ministry of urban affairs. Accordingly the issue has managed a rating of AAA from Crisil on the strength of the guarantee.

This is the third urban development bond issue that is hitting the debt markets. The previous issues was made by the Ahmedabad Muncipal Corporation and the Bangalore Muncipal Corporation, with coupons of 14 per cent. Both these issues had evoked phenomenal response from the markets.

All these issues had also used credit enhancement mechanisms to ensure prompt payments to bondholders. The AMC issue had created an escrow account based on the octroi inflows, whereas Bangalore had used the state government guarantee route.