Vidarbha Irrigation Bodys Bond Issue Finds Few Takers

The Vidarbha Irrigation Development Corporation's series-VII bonds worth Rs 225 crore do not seem to have found favour with investors as the corporation has only been able to raise only Rs 3.72 crore during the first month of the offer.

The fully-secured non-convertible bonds, which are backed by the state government's unconditional and irrevocable guarantee, were placed in the market on December 10, 2001, for seven weeks.

The lack of response to the bonds has put a question mark over a proposed common bond, which is likely to be floated by the government in few months.

The poor response has come as a rude shock to the corporation, which was hoping that the bonds would save it from doom. The state government had also permitted the corporation to raise an additional Rs 50 crore through oversubscription. But, from the day one of the issue, there has been virtually no response to the bonds.

 

During first 15 days, the corporation could not get a single buyer for the offer thus forcing authorities to stop work at all project sites. This is one of the worst set back for the cash-starved corporation which is fighting for its survival.

The corporation has had a fairly good track record and the bonds were given a rating of A+ by the rating agency Care.

While Bank of Maharashtra is trustee to the issue, Menon Financial Services is Registrar. The bonds are for 7-, 10- and 12-year lock-in periods with interest rates of 11 per cent, 11.25 per cent and 11.5 per cent respectively.

All the five irrigation corporations in the state, Maharashtra Krishna Valley Development Corporation, Tapi Irrigation Development Corporation, Godavari-Marathwada Development Corporation, Konkan Irrigation Development Corporation and Vidarbha Irrigation Development Corporation have floated public bonds to raise money for irrigation projects, but have met disappointment due to the cold response shown by financial institutions.

All the corporations have outstanding dues and liabilities to meet, but if the response received by the Vidarbha Irrigation Development Corporation bonds is any indicator, they may fall back on their commitments.

At present, the Maharashtra Krishna Valley Development Corporation has outstanding bills worth Rs 430 crore, Tapi Irrigation Development Corporation (Rs 203 crore), Konkan Irrigation Development Corporation (Rs 62 crore) and Godavari-Marathwada Development Corporation (Rs 92.56 crore).

The five corporations need Rs 1,609 crore just to meet their current liabilities. In fact, the Maharashtra Krishna Valley Development Corporation alone needs a whopping Rs 1,719 crore to complete its annual plan for the current fiscal.

The Vidarbha Irrigation Development Corporation here has already been forced to revise its annual plan due to the state government's refusal to release annual grants. The corporation has decided to spend Rs 591 crore towards completion of 54 projects, including 14 major irrigation projects (Rs 406 crore), 27 medium projects (Rs 109 crore) and 55 minor projects (Rs 76 crore).

It initially planned to raise Rs 450 crore from open market by floating public bonds and Rs 141 crore was promised by the state government. But till January 11, 2002, it could only raise Rs 208 crore from series-VI bonds and Rs 8 lakh from series-VII bonds.

The balance amount in series-VII bonds came during January 11-15 as some contractors from Uttar Pradesh evinced interest. Most of the money collected till January 11 has already been spend in establishment cost and cost of land acquisition.

The corporation now has to pay Rs 53 crore for the ongoing essential constructions at various projects and Rs 81 crore towards land acquisition.

Sources said the corporation was scrapping the bottom to meet these demands on it. To worsen the situation the revenue department too has decided not to acquire further lands till the old dues are cleared thus bring a virtual halt to irrigation work in the region.

The corporation has been entrusted to complete 96 projects whose revised cost is estimated at Rs 11,496 crore out of which only Rs 3,359 have been spent. It is facing a gigantic task of completing these project by raising a mind-boggling Rs 8,137 crore through public bonds and government grants.

State governor, P C Alexander, in his directive under Article 371(2) of the Constitution of India, has directed the state government to float common bonds for all the irrigation corporations and ensure equitable distribution among all regions. This was done to provide a respectable sum to all the corporations and in the backdrop of step-motherly treatment accorded to corporations other than Krishna Valley.

Even the Maharashtra State Co-Operative Bank preferred to opt for bonds floated by Krishna Valley earlier leaving others in lurch. The Vidarbha Irrigation Development Corporation, which has witnessed a journey from the most cash-rich corporation to a cash-starved entity, within one year, demonstrates how too much dependence on public bonds could spell disaster. Its series-VI bonds too did not fare well as the corporation could mop up only Rs 208 crore against an expected Rs 356 crore.