Indore Municipal Corporation's Green Bond: A Milestone in Urban Sustainability

 


Indore Municipal Corporation's Green Bond: A Milestone in Urban Sustainability

Introduction 1

Overview of the Green Bond Issue 1

Investor Response and Subscription Details 2

Utilization of Funds 2

Listing and Future Implications 2

Conclusion 3



Introduction

In February 2023, the Indore Municipal Corporation (IMC) achieved a significant milestone by issuing green municipal bonds to fund a 60 MW solar power project in Madhya Pradesh's Khargone district. This initiative marks a pioneering step for urban local bodies in India, showcasing a commitment to sustainable development and financial innovation.(mercomindia.com)

Overview of the Green Bond Issue

The IMC's green bond issue aimed to raise ₹244 crore, with a base issue size of ₹122 crore and an option to retain oversubscription up to ₹122 crore. The bonds were structured into four separately transferable and redeemable principal parts (STRPPs), each with a face value of ₹250, corresponding to tenors of 3, 5, 7, and 9 years. The coupon rate was set at 8.25%, with an effective yield ranging from 8.41% to 8.42%, depending on the category of investors. The bonds were rated 'IND AA+/Stable' by India Ratings and 'CARE AA/Stable' by CARE Ratings, ensuring a secure investment proposition.(m.economictimes.com, hdfcsec.com)

Investor Response and Subscription Details

The green bond issue received an overwhelming response, with an overall subscription of 5.91 times the issue size, totaling approximately ₹720 crore. Institutional investors led the demand, subscribing 7.52 times, followed by corporate investors at 6.71 times, high-net-worth individuals (HNIs) at 3.62 times, and retail investors at 5.78 times. This robust interest underscores the growing appetite for sustainable investment opportunities in India. (outlookbusiness.com, m.economictimes.com)

Utilization of Funds

The proceeds from the green bonds are earmarked for the development of a 60 MW ground-mounted captive solar photovoltaic project in the villages of Samraj and Ashukhedi in Khargone district. This project is expected to significantly reduce IMC's dependency on grid electricity, particularly for pumping water from the Narmada River to Indore, thereby lowering operational costs and carbon emissions. The project has been registered under the Verified Carbon Standard Association, allowing IMC to earn carbon credits. (hdfcsec.com, swastika.co.in, mercomindia.com)

Listing and Future Implications

On February 21, 2023, the IMC's green bonds were listed on the National Stock Exchange (NSE), marking a significant achievement in municipal financing. This move not only enhances the liquidity of the bonds but also sets a precedent for other urban local bodies to explore green financing avenues. The success of this initiative aligns with India's broader vision for a clean and green energy future, demonstrating the potential of local governance in driving sustainable development. (m.economictimes.com)

Conclusion

The IMC's green bond issue represents a transformative approach to urban sustainability, combining financial innovation with environmental responsibility. It serves as a model for other cities in India and beyond, illustrating how local governments can leverage capital markets to fund renewable energy projects and contribute to national climate goals.

For more detailed information, you can refer to the official press release by the Government of Madhya Pradesh: (mpinfo.org)

Additionally, a video discussing the issuance of these green bonds is available here:(youtube.com)Indore Municipal Corporation Issues Green Bonds | ET Now

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