Can Munibonds sail through without state guarantees? Pune Municipal Corporation (PMC), the 67-year-old and second-largest corporation in Maharashtra, will be a test case of whether the market has an appetite for municipal bonds and that too without state guarantees to back it. The Rs 2,264-crore maiden municipal bonds from the PMC is expected to hit the market in a fortnight and is looking at listing by June 22. The proposed bond issue received the approval of the Maharashtra government on Monday but the state government will not be providing any guarantee. “The PMC should take care that the repayment takes place on time. The state government would not be able to provide any help for it,” the Maharashtra government resolution said. The PMC will be banking on its AA (Fitch) credit ratings and a good financial track record for the issue. The PMC plans to use these issue proceeds to part fund the 24X7 water project to enable equitable supply of water throughout the city. The project cost is estimated to be at Rs 3,513 crore.
While Rs 2,264 crore will come from the bond issue, the remaining will be raised from the Central and state government schemes. “The state government is giving consent to the PMC to raise funds from municipal bonds on the condition that the PMC will have the complete responsibility to repay the raised amount, along with the interest. The state government would not be a guarantor to PMC for the purpose. The PMC should open a separate escrow account in nationalised bank for repayment of the raised amount through municipal bonds,” the government GR said.