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The country’s first local government bond is going to be offered by Indore, which is in the Madhya Pradesh state’s capital, a city in India with a solid environmental track record, and the revenues generated will be used to fund a solar power plant.
According to Divyank Singh, CEO of Indore Smart City, who is working with numerous stakeholders to complete the offering, Indore Municipal Corp. hopes to generate up to Rs. 2.6 billion through a 10-year bond sale next month.
Singh said the issuer has designated A.K. Capital Services Ltd. and SBI Capital Markets Ltd. as the offering’s lead managers.
The Indore offering is also expected to be the first municipal green bond issued in the nation specifically for retail investors.
In accordance with Divyank, the 60-megawatt (MW) solar facility would be built close to Indore at a cost of Rs. 3 billion and will allow the city to save as much as Rs. 250 million per month on its power costs.
Indore could have easily obtained funding for the solar power plant from banks or other private sources, but instead, Singh added, “we have chosen to go out to the people because it offers a sense of belongingness.”
He further said that the issuance opens opportunities for others to follow suit and represents an alternate, more recent source of finance for the municipality.
The central bank of India has also urged local governments, which rely primarily on grants or bank loans for finance, to think about issuing municipal bonds.
The World Bank has calculated that the third-largest economy in Asia would need to invest $840 billion in urban infrastructure over the next 15 years to fulfill demand from a rapidly expanding urban population, and therefore the green debt auction is taking place at the time, which cannot be more appropriate.
According to a poll carried out by India’s housing and urban affairs ministry, Indore has won the title of the cleanest city for six years running.