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AMC bonds generate high interest, but common man gets only leftovers
Jai Kumar N R
MUMBAI, December 28: The public share of the cake in the Ahmedabad Municipal Corporation's Rs 100-crore bond issue is very small. The corporation has already reserved a sizeable (Rs 75 crore) portion of the issue on firm allottment basis to financial institutions/banks like SBI (Rs 20 crore), UTI (Rs 10 crore), HDFC (Rs 10 crore), ANZ Grindlays (Rs 8 crore), Indian Bank (Rs 5 crore), Federal Bank (Rs 5 crore), Times Bank (Rs 5 crore), State Bank of Hyderabad (Rs 5 crore), Punjab & Sind Bank (Rs 2 crore), Templeton Asset Management (Rs 2 crore), IDBI MF (Rs 2 crore) and Bank of Madura (Rs 1 crore).
Moreover, since the corporation does not have a green-shoe option, risk-averse investors will have few bonds to satisfy their appetite. The secured redeemable bonds are christened `City Regular Income Bond'.
The coupon of 14 per cent seems to be attractive considering the accross-the-board cut in interest rates by banks after the busy season credit policy. The bonds will be redeemed in three tranches of Rs 333, Rs 333 and Rs 334 at the end of 5th, 6th and 7th from the date of allotment, respectively.
The interest on bonds, which will be paid semi-annually on March 31 and September 30, will be subject to TDS. The investor will have to pay the entire amount of Rs 1000 (facevalue of the bond) as application money. An investor has to invest a minimum of Rs 5000 in the bonds (market lot one bond).
Although the safety regarding the payment of principle and interest is not a major worrying factor here (Crisil has given a AA(SO) rating to the bonds which indicates high degree of certainty regarding timely payment of financial obligations), the bonds are not guaranteed by the Gujarat government.
Noteably, State Bank of India and Indian Bank have agreed in principle to accept pledge of the bonds as security for loan granted to investors.
Besides the firm-allottment, the net public portion of Rs 25 crore is underwritten by ILFS (Rs 6.25 crore), Kotak Mahindra Capital (Rs 6.25 crore), SBI Capital Markets (Rs 3.75 crore), ANZ Investment Bank (Rs 3.75 crore), Weizmann Ltd (Rs 2.5 crore), Dena Bank (Rs 2 crore), Interface Financial (Rs 25 lakh) and Hemendra R Seth (Rs 25 lakh).
AMC is floating the bonds to part-finance a Rs 489-crore water project and sewerage project for the development and improvement of the city of Ahmedabad.
Apart from the present issue, the fund requirement is being met by way of internal accruals of Rs 147 crore, a housing guarantee fund of Rs 90 crore from USAID and institutional finanace to the tune of Rs 151 crore.
For the fiscal 1996-97, the corporation's total revenue receipts stood at Rs 387.2 crore. The revenue surplus before the debt servicing was Rs 99.89 crore and after the debt servicing, it stood at Rs 65.25 crore.
For the four-month period of April-July 1997, total revenue stood at Rs 104 crore and revenue surplus after the debt servicing was Rs 17.18 crore.
Lead managed by ILFS, the bonds will be listed on the Ahmedabad Stock Exchange and the National Stock Exchange.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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