Indore Municipal Corporation NCD Company Profile:
Indore Municipal Corporation (“IMC”) is the chief municipal body of Indore city. Presently, Shri Pushyamitra Bhargava is the Mayor, and Smt. Pratibha Pal, IAS, is the Commissioner (Nagar Aayukt) of the Issuer. IMC is covered under the AMRUT Scheme of the Government of India. Also, Indore Municipal Corporation holds a 50% equity shareholding of Indore Smart City Development Limited (ISCDL) which has been incorporated as a Special Purpose Vehicle under the Companies Act, 2013 to implement the smart city proposal of Indore Municipal Corporation under Smart City Mission (SCM). ISCDL has been involved in the successful completion of several projects.
Indore Municipal Corporation is coming up with a public issue rated, listed, taxable, secured, redeemable, non-convertible green municipal bonds of face value of ₹ 1,000/- each, (comprising of 4 (four) separately transferable and redeemable principal parts (“STRPP”) namely 1 STRPP A of face value of ₹ 250/-, 1 STRPP B of face value of ₹ 250/-, 1 STRPP C of face value of ₹ 250/- and 1 STRPP D of face value of ₹ 250/-, for an amount of up to ₹ 122 crores (“Base Issue Size”) with an option to retain oversubscription of up to ₹ 122 crores (“Green Shoe Option”) aggregating up to ₹ 244 crores (“Total Issue Size”) under Securities and Exchange Board of India (Issue and Listing of Municipal Debt Securities) Regulations, 2015, as amended from time to time. The issue opens for subscription on Friday, 10th February 2023, and will close on or before Tuesday, 14th February 2023. The allotment is on a first come first serve basis with the minimum application to be made is of 10 NCDs.
Indore Municipal Corporation NCD Details:
|Tranche I Issue opens:||Friday, 10th February 2023|
|Tranche I Issue closes:||Tuesday, 14th February 2023|
|Allotment:||First Come First Serve Basis|
|Face Value:||₹ 1,000 per NCD|
|Nature of Instrument:||Secured Redeemable Non-Convertible Green Municipal Bonds|
|Minimum Application:||10 NCDs (₹ 10, 000) & in multiple of 1NCD|
|Credit Rating:||‘IND AA+/Stable’ by India Ratings and Research Private Limited and ‘CARE AA/Stable’ by CARE Ratings Limited|
|Tranche I Issue Size:||Public issue by Indore Municipal Corporation of rated, listed, taxable, secured, redeemable, non-convertible green municipal bonds of face value of ₹ 1,000/- each, (comprising of 4 (four) separately transferable and redeemable principal parts (“STRPP”) namely 1 STRPP A of face value of ₹ 250/-, 1 STRPP B of face value of ₹ 250/-, 1 STRPP C of face value of ₹ 250/- and 1 STRPP D of face value of ₹ 250/-, for an amount of up to ₹ 122 crores (“Base Issue Size”) with an option to retain oversubscription of up to ₹ 122 crores (“Green Shoe Option”) aggregating up to ₹ 244 crores (“Total Issue Size”) under Securities and Exchange Board of India (Issue and Listing of Municipal Debt Securities) Regulations, 2015, as amended from time to time|
|Registrar:||KFIN Technologies Limited|
|Category||I – Institutional (“QIB”)||II – Non-Institutional (“Corporates”)||II – High Net worth
(Amount aggregating to
above ₹ 10 lakh)
|II – Retail Individual (“Retail”) (Amount aggregating up to and including ₹ 10 lakh)|
|Category Allocation of the overall Issue Size||25%||25%||25%||25%|
|Bucket Size (₹) assuming Issue size of ₹ 244 Cr₹||₹ 61 Cr||₹ 61 Cr||₹ 61 Cr||₹ 61 Cr|
Indore Municipal Corporation NCD Specific Terms of the Prospectus:
The terms of the NCDs offered under the Issue are as follows:
|Frequency of Interest Payment||Half-yearly||Half-yearly||Half-yearly||Half-yearly|
|Tenor||3 Years||5 Years||7 Years||9 Years|
|Coupon (% per annum) for NCD Holders in Category I, II, III & IV||8.25%||8.25%||8.25%||8.25%|
|Effective Yield (per annum) for NCD Holders in Category I, II, III & IV||8.41%||8.41%||8.41%||8.42%|
|Maturity / Redemption Date (from the Deemed Date of Allotment)||3 Years||5 Years||7 Years||9 Years|
Indore Municipal Corporation NCD Credit strengths:
IMC’s liquidity position is supported by sustained revenue surpluses (excluding depreciation), capital grants to fund capex, sizeable cash and bank balances and unencumbered investments in fixed deposits. The corporation has adequate cash buffers. The cash and bank balances and investments stood at close to INR5,840 million at end-September 2022 (FYE22: INR5,603.79 million). The proposed NCDs will have a staggered repayment, which as per the draft term sheet will commence from FY26. Hence, the debt servicing to operating revenue would be less than 10% in the medium term. Ind-Ra expects IMC to maintain a healthy liquidity profile in the medium term, with the debt payment obligations being met comfortably through the operating revenue surplus.
Property taxes averaged 70% of the total tax revenues during FY18-FY22. The property tax collection efficiency in terms of current demand ranged between 54%-68% during FY20- FY22. On the arrears recovery front, the collection efficiency has been modest, although it improved to 18% in FY22 (FY21: 16.7%), resulting in total collection efficiency (arrears plus current demand) of close to 29% during the year (26%).
IMC has a track record of fundraising from banks and financial institutions (FIs) for funding its capex plans and had an outstanding debt of ₹579 crore as on March 31, 2022. While the debt levels have witnessed an increase over the past five years, the same has been complemented by growth in the revenue surplus. This has enabled the corporation to maintain healthy coverage metrics with debt/surplus below 2x as on March 31, 2022. The debt service coverage ratio (DSCR) is also expected to remain at a comfortable level for the corporation, based on the current borrowings and capex plans.
IMC has a strong track record in terms of coverage and service delivery, with about 100% coverage of solid waste, sewerage, and stormwater drainage. IMC is the first urban local body (ULB) in India to set up waste management under the public-private partnership (PPP) model and has been ranked as the cleanest city in the country six times consecutively by the Ministry of Urban Development (MoUD) in its Swachh Survekshan Survey. Although there are shortfalls in the coverage of water supply, the corporation is likely to address the same going forward.
Indore Municipal Corporation NCD Risk factors:
IMC’s own revenue in the form of property tax income, fees and user charges, and other non-tax revenue components comprise only 46% of the overall revenue receipts during the past three years. The collection efficiency of tax revenue has also been moderate at around 64% during FY20-22 (58% during FY18-FY20). A considerable share of RRs comprises GST compensation receipts from the state government, which alone forms 30% of the RR. The corporation receives the share of GST compensation as per the budgetary allocations for ULBs by the state government (the approximate share of IMC has been around 12%). While the compensation is being received in a timely manner, the susceptibility of revenue to delays in receipt or regulatory changes exists.
For any queries related to the NCD, you can consult the team at Elite Wealth. Since Demat is mandatory for investing in this particular NCD from NHIT, the investor must open a Demat account with a trusted broker like Elite Wealth.