State irrigation minister Eknath Khadase told The Financial Express that Godavari Marathwada Irrigation Development Corporation (GMIDC) bond issue will be of Rs 300 crore with an oversubscription of Rs 100 crore. The size of Vidarbha Irrigation Development Corporation (VIDC) bond issue will be Rs 200 crore with an oversubscription of Rs 50 crore, Tapi Irrigation Development Corporation (TIDC) Rs 200 crore with an oversubscription of Rs 50 crore and Konkan Irrigation Development Corporation Rs 100 crore with an oversubscription of Rs 50 crore.

Allianz Services and Kotak Mahindra Capital Co have offered to lead manage the Rs 300-crore bond issue of GMIDC. Allianz has quoted an interest of 15 per cent with 0.20 per cent fee on the amount mobilised. It has suggested 15 days to raise Rs 300 crore.

Kotak Mahindra has suggested an interest of 14.50 per cent with a fee of 0.20 per cent. It has assured that it will raise Rs 300 crore within 30 days.

I-Sec (interest 14.70 per cent and fee 0.20 per cent), KJMC (interest and fee not quoted), Canara Bank (interest 14.75 per cent and fee 0.20 per cent) and Aplic Finance (interest 14.75 per cent of 15 per cent and fee 0.20 per cent) have offered to raise money for TIDC.

AK Capital (interest 14.35 per cent and fee 0.39 per cent), Centrum Finance (interest 14.75 per cent and fee 0.20 per cent), Aryaman Financial Services (interest 14.5 per cent and fee 0.20 per cent), Canara Bank (interest 14.75 per cent and fee 0.20 per cent) and SBI Capital Markets (interest 14.50 per cent and fee 0.20 per cent) have offered to raise money for KIDC.

JM Finance and Investment has offered to float a bond issue of VIDC. However, it has not quoted the rate of interest and the fee.

Khadase said that the irrigation department had offered an interest of 14.50 per cent for the proposed bond issues. However, it was not averse to increasing it by 25 basis point. The decision related to appointment of lead manager and rate of interest will be taken soon.

Khadase is optimistic that these issues will be oversubscribed. Credit Analysis & Research (CARE) has recently given a credit rating of AA- (structured obligation) to the proposed bond issue of GMIDC. The bonds will be unconditionally and irrevocably guaranteed for repayment of principal and interest thereon till maturity by the state government.

A tripartite agreement among the government, GMIDC and the trustees to the bondholders will assure committed and adequate budgetary support from the state government for the repayment of principal and payment of interest on the bonds. Similar agreements will be signed for KIDC, TIDC and VIDC.

Insight

Government has little choice: The fact that the state government is going ahead with its resource-raising plans is not surprising at all despite its precarious financial position. The state government has no choice as it has been accused of falling behind in its development work and capital outlay for the same. Funds marked for a capital outlay are being increasingly used for bridging the revenue deficit. While the state government will not be detered from raising funds following the downgrade, there will be a higher price to be paid as a result of that.