Chennai's Municipal Bond Revival: Will This ₹200 Cr Issue Find Success?

The Greater Chennai Corporation (GCC) has received in-principle approval from the Council to raise ₹200 crore through municipal bonds to partially fund the integrated stormwater drain project in North Chennai. The funding for the project, estimated to cost ₹3,220 crore, comprises ₹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. The municipal bond will part fund GCC's contribution to the project.

GCC has an outstanding rating of 'AA-' for its bank loans, which means the bond is likely to achieve a high safety rating. The GCC has been running a revenue deficit though the levels of deficit have been coming down.

Strangely, the GCC tried to raise a bond of Rs. 45 cr in 2005, by way of private placement for building roads in Chennai. It appears that the issue was not a success. Times have changed and GCC's proposed bond is likely to be over subscribed!