Rs 75cr Amc Bonds 100% Oversubscribed

Ahmedabad Municipal Corps

Rs 75 crore municipal bond issue the first by a municipal body in India has been oversubscribed 100 per cent. The seven-year, privately placed issue offers a benchmark coupon of 15 per cent at a time of declining interest rates.

The issues effective yield works out to 15.56 per cent, through half-year payments. The issue also offers early exit options at the end of three years. The entire issue is on a general obligation basis, implying that AMC will meet the interest and principal repayments out of its own revenue flow. Crisil rated the issue A+ implying adequate safety.

AMC has decided not to exercise the greenshoe option and opted instead for a retail offer of Rs 25 crore, targeted at subscribers in Ahmedabad.

The bonds have been lapped up by banks and financial institutions, since it offers an effective spread of about two per cent over the prime lending rate, making it one of the most attractively priced offerings in the market. The liquidity surplus in the markets has also contributed greatly to the issues success.

Most of the bonds in the same rating range are offering effective yields of 50 basis points above the maximum lending rates of banks. Provident funds have also snapped up the issue, since these funds are unable to find quality assets offering identical yields.