Ahmedabad Municipal Bonds

First issuance of a municipal bond to retail investors in the country

One of the key developments in the arena of infrastructure financing in the country has been the emergence of a nascent municipal bond market in the country. The concept of municipal bonds as an additional mechanism for raising resources for urban infrastructure projects was first discussed in December 1995 at a national seminar. Later, the Rakesh Mohan Committee on the Commercialization of Infrastructure Projects in India also discussed the possibility of using municipal bonds as a tool for raising finances from markets

Internationally, municipal bonds have played a key role in the creation of urban infrastructure assets in United States and Canada. Therefore, it was envisaged that adapting this model to the Indian context would open new vistas for attracting private capital to the urban infrastructure sector

Taking a cue from the emerging discussions, the Ahmedabad Municipal Corporation (AMC) proposed to raise finances of Rs.1000 Million through municipal bonds. The AMC was at that time proposing to implement water supply & sewerage project and upgrade its existing networks for which it required substantial resources. It proposed to raise part of the resources required for this project through the bond issue

The AMC approached IL&FS in 1997 for structuring the transaction and for the issuance of the bonds. IL&FS thus became the financial advisor to AMC and the lead manager to the bond issue

The Ahmedabad Municipal Bond was an important innovation in the financial markets and in the field of financing infrastructure projects by a local body due to the following :

  • (a) it was the first issue by a local body to raise resources without a state government guarantee
  • (b) evolution of innovative credit enhancement measures that were used to structure the municipal cashflows for repayment to bondholders set the trend for evolving such recourse structures for municipal financing in India
  • (c) application of innovative cashflow structuring for credit enhancement facilitated enhancement of “A+”credit rating done by CRISIL to AA(SO), which facilitated a better position in the market
Projects in this Sector
  • Delhi-Noida Toll Bridge
  • East Coast Road
  • Tirupur Water Supply Project
  • Visakhapatnam Industrial Water Supply Project
  • Jal Mahal Tourism Project
  • Ahmedabad Municipal Bonds
  • AIG Indian Sectoral Equity Fund (AISEF)
  • Kottayam-Kumarakom Ecocity Project
  • Environmental Information Centre (EIC)
  • K-Yan Compact Media Centre