Greater Chennai Corporation to receive support from U.S. treasury to raise funds through municipal bonds

GCC collaborates with U.S. Treasury officials to issue municipal bonds for infrastructure projects, aiming to improve fiscal prudence.

The Greater Chennai Corporation (GCC) has started discussions with experts from various countries, including officials of the United States (U.S.) Treasury, to issue municipal bonds. The team of officials from the U.S. will assist the civic body in issuing the bonds by March.

The U.S. Treasury officials have started assisting many other cities in India to issue municipal bonds, said a GCC official. With the approval of the Centre, the Tamil Nadu government has asked civic bodies, such as the GCC, to receive assistance from the U.S. officials. “Once the municipal bonds are issued by the GCC, the fiscal prudence is expected to improve. The experts have stressed the need to fix financial records and audit paras to facilitate the issuance of municipal bonds. The records have to be clean ahead of obtaining the clearance of the Securities and Exchange Board of India (SEBI),” and official said.

The money raised by the GCC through municipal bonds is not cheaper compared to borrowing from other commercial entities. But it opting to issue municipal bonds as the Centre has announced incentives for local bodies that raise money through municipal bonds to implement infrastructure projects. “The GCC will receive an incentive of ₹26 crore from the Centre,” an official said.

The GCC has already received in-principle approval from the Council to raise ₹200 crore through municipal bonds to partially fund the integrated storm-water drain project in the Kosasthalaiyar Basin. The funding for the project, estimated to cost ₹3,220 crore, compirses ₹1,789 crore from the Asian Development Bank in the form of grant and loan, ₹681 crore from the State government under the Singara Chennai 2.0 Scheme, and ₹750 crore from the GCC itself. Under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the GCC is eligible for an incentive grant of ₹13 crore for every ₹100 crore raised.

In a bid to facilitate bond issuance, key intermediaries, such as three transaction advisors-cum merchant bankers, two credit rating agencies, a chartered accountant firm, and a legal counsel, have been engaged by the GCC. Further, a team of technical advisors have been hired for this process.

The draft term sheet for the bond structuring is under discussion and will be finalised and sent for State government approval soon. After obtaining approvals from the State government and other stock exchanges and SEBI clearances, the bond will be listed on the stock exchange. The GCC aims to finalise the placement memorandum and issue bonds by the first or second week of March, said an official.