Indore Municipal Corporation’s (IMC) green bonds have been oversubscribed by almost six times, raising about Rs 720 crore as of Tuesday, February 14, the last date for application for the bonds. The issue was open for subscription from February 10 to February 14. The civic body had aimed to raise around Rs 244 crore for the installation and operation of a 60-megawatt solar power plant in Madhya Pradesh’s Khargone district, which is expected to be the largest solar plant meant for pumping and supplying water from Narmada.
The success of the Swachhata campaign, the IMC’s experience with municipal bonds, its annual revenue, and the faith of Indorians were among the reasons that led the civic body to issue green bonds. The solar plant’s cost is estimated to be Rs 305 crore, with the rest covered through government subsidies, such as viability gap funding from the Ministry of Renewable Energy and AMRUT 2.0.
Green bonds are debt securities issued by a public or private organization to finance or refinance projects that have a positive impact on the environment. The IMC’s green bonds have a rating of AA-plus from credit rating agency India Ratings and Research, and they are being issued at a minimum bid of Rs 1,000 with four separately transferable and redeemable principal parts. The total issue size is Rs 244 crore, with a base issue of Rs 122 crore and an option to retain oversubscription up to another Rs 122 crore. IMC has to pay an interest of 8.25 per cent per annum on these bonds payable half yearly, and their maturity is between three and nine years.
IMC Commissioner Pratibha Pal said that the solar power project would be funded, but more importantly, it would pave the way for more such green projects and explore innovative financing methods to fund them. She attributed the overwhelming response to the issue to the urban local bodies for the first time in India issuing green bonds, the type of project they are opting for, and the timing of the issue. The opening for the issue was just after the budget, and in it, municipal bonds were given huge importance.
The oversubscription of the green bonds is a term used when demand for new stock is greater than the number of shares actually available. IMC was hoping for 10 to 15 times oversubscription of its bonds against the 1.26 times witnessed in 2018 when Indore became the first city to list municipal bonds on the National Stock Exchange’s debt securities platform.