Does GWMC need muni bonds?

Does GWMC need muni bonds?
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Highlights

A few pertinent questions have come to fore about the competency of the Greater Warangal Municipal Corporation GWMC that wants to float the municipal bonds, also known as muni bonds, to raise Rs 100 crore for its developmental activity This comes in the wake of Standing Committees approval for initiating the process of issuing municipal bonds last week

Warangal: A few pertinent questions have come to fore about the competency of the Greater Warangal Municipal Corporation (GWMC) that wants to float the municipal bonds, also known as muni bonds, to raise Rs 100 crore for its developmental activity. This comes in the wake of Standing Committee’s approval for initiating the process of issuing municipal bonds last week.

The moot point here is that does the GWMC really need to raise finances through muni bonds at this stage when it’s struggling to make use of Rs 900 crore developmental funds released by the State government in last three years.

It’s not that these funds are enough to carry all the proposed developmental works pan-Greater Warangal limits. But the stats suggest that of the Rs 900 crore released in last three years by the State government, works worth around Rs 297 crore were only in progress. This indicates the kind of slow pace of works in the corporation.

Against this backdrop, the GWMC wants to amass funds by issuing muni bonds using the Bombay Stock Exchange (BSE)’s platform. Although the ongoing AMRUT scheme was aimed at providing drinking water to all the households in the city, the GWMC wants to complement it by raising Rs 100 crore through muni bonds.

The Greater Hyderabad Municipal Corporation’s success in raising Rs 200 crore might have prompted the Warangal urban local body (ULB) to follow the suit. However, it’s not all that easy to do so as there are a set of norms that needed tobe fulfilled.

A ULB should not have negative net worth for the last three financial years. This apart, the ULB should have a minimum credit rating of A+ (A plus) issued from at least one of the recognised credit rating agencies. As of now, the ULB’s credit rating is A- (A minus). However, according to Municipal Commissioner VP Gautham the current rating is not all that bad. He said that they are in consultation with the rating agencies to improve it.

Speaking to The Hans India, Forum for Better Warangal president Pulluru Sudhakar said: “With the kind of credit rating the GWMC has, it’s difficult to draw the attention of the investors. Moreover, if the project selected for the muni bonds is revenue generating, denizens will have to bear the burden, or else the GWMC has to bear from its income.” He said that instead of municipal bonds, the GWMC should go for pooled financing, which is successful in Tamil Nadu and Karnataka.

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