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Govt clear AMC's Rs 100-cr bond issue Saturday, September 29, 2001

Source Times News Network
AHMEDABAD: After a long, painful wait - one that saw the Ahmedabad Municipal Corporation miss its deadline of March - for issuance the Rs 100-crore tax-free bonds, the corporation finally got the nod from the Gujarat government on Friday.

With the magic word being tax-free, those investing in the bonds will earn non-taxable interest on the debenture. This is however the second avtaar of the path-breaking non-convertible debentures first launched by the AMC in 1998.

The Rs 100 crore bond (non-convertible debentures) is part of a Rs 300-crore water and sewerage project drawn up by the corporation to spruce up the water supply and sewage system of a city awaiting megacity status.

Unlike in 1998, however, when the AMC earned accolades as a trendsetter -- the first municipal corporation in India to issue public bonds based on an enviable AA(SO) rating by CRISIL, this time the corporation authorities are prepared to while their time till the opportune moment arrives.

AMC commissioner K. Kailashnathan told TNN: "Though we have got the green signal from the state government we will have to wait a while. The terrorists attack on WTC in New York has in its global, ripple effect has boosted prevalent rate of interest (in the open market) on loans taken to almost 10.5 per cent. We however want the interest rate to be around 9 and 9.5 per cent when we float the bonds. I expect the market to stabilise within a week from now."

Unlike the public bonds issued in 1998 the ones belonging to a new millennium will not be marketed and will be sold by "word of mouth" that too only to large commercial groups or financial institutions.

The other major change could be the proposed 10-year period for the new debentures instead of the seven, as in 1998. The bonds will hold out interest rate ranging around 9.5 per cent (as compared to the 14 per cent of 1998) which is expected to draw good response as its premium will be tax-free.

Meanwhile, the corporation has already done its homework by attracting investors for the tax-free bonds worth Rs 100 crore. A source in AMC disclosed: "Since this bond is only meant for financial institutions, contacts have been established with ICICI, Gujarat State Financial Services and ILFS. Now it is just buying time till the right moment."

News Source : The Times of India [India's best Newspaper]

 

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