The Pune Municipal Corporation (PMC) is planning a bond offering of R2,300 crore, in what will be the country’s largest municipal bond issue till date. The Ahmedabad Municipal Corporation (AMC) also proposes to float bonds but for a much smaller amount of R200 crore. Pune, the second-largest corporation in Maharashtra, earns the bulk of its revenues from property taxes and local body taxes which have risen sharply in recent years. The PMC issue has not been guaranteed by the Maharashtra government.

Only a handful of municipalities are rated double A and above. Jayanta Roy, senior V-P at ratings agency ICRA, says that due to the push from the Smart Cities and Atal Mission for Rejuvenation and Urban Transformation (AMRUT) programmes, there is an increasing trend of urban local bodies (ULBs) getting themselves rated. PMC’s revenue surplus rose 18.5% to R2,000 crore in 2015-16 while the operatingThe civic body has also asked it be allowed to disclose mandatory information either on a half-yearly or annual basis rather than on a quarterly basis, as is the norm.

In the two decades since 1997, close to 30 municipalities have raised a total of R1,353 crore via taxable bonds, tax-free bonds and pooled financing. Typically these investors in these instruments are institutions including insurers, such as Life Insurance Corporation, public sector banks and a couple mutual funds. The largest of the offerings has been Bangalore Municipal Corporation’s R125-crore bond issue in 1997 which was guaranteed by the state government at that time. For Ahmedabad, this would be the fifth time the city’s civic body is hitting the bond markets. Its first offering was for R100 crore, without a state government guarantee, in January 1998.

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