GHMC to raise Rs.3,500 crore through bonds

The cash-strapped Greater Hyderabad Municipal Corporation(GHMC) has drawn up plans  to raise a whopping Rs 3,500 crore to fund developmental projects in the city.

For the first time, it will raise a Rs 2,500-crore fund in the form of Rupee Term Loan (RTL) and Rs 1,000 crore in municipal bonds. In the past, the GHMC had floated municipal bonds but not RTL. The funds thus raised will be used to execute the state government flagship two-bedroom houses (2BHK) for poor and weaker sections programme,  the Strategic Road Development Plan (SRDP) and other infrastructure projects in the twin cities. The total cost of SRDP is estimated at around Rs 22,000 crore. The corporation has invited requests for proposal from financial institutions for acting as merchant banker for GHMC to raise municipal bonds as well as RTL. 

A merchant banker is a financial



institution that provides capital to companies in the form of share ownership instead of loans.The merchant banker is required to advise the GHMC on the regulatory norms and assist it in securing approval and exemptions where necessary from various regulatory agencies including SEBI, stock exchanges and Reserve Bank of India. 

It is also to assist GHMC in the selection of intermediaries to issue of non-convertible debentures (NCD) such as the registrar and transfer agent, debenture trustee and coordinate with these intermediaries.  

For RTL, the merchant banker should understand the underlying revenue and cost model of GHMC, prepare the necessary financial projections and short-list potential banks, financial institutions in consultation with the GHMC for further discussion and assist the GHMC in obtaining sanctions.