SEBI seeks relaxed rules for municipal bodies eyeing bond market

SEBI seeks relaxed rules for municipal bodies eyeing bond market

SEBI has approached the government to allow municipal corporations and municipalities to access the bond market through pooled finance

The capital markets regulator has approached the government to allow municipal corporations and municipalities to access the bond market through pooled finance, two people aware of the development said.Many civic bodies do not sell bonds because lower-rated securities have few takers. In pooled finance, several civic bodies jointly float a trust, which issues the bonds.

Investors are seen as more open to buying bonds which can be serviced by different revenue streams. Trusts are currently not allowed to sell bonds.The Securities and Exchange Board of India (Sebi) was previously considering a proposal to allow small municipal bodies to come together

“The feedback Sebi gathered is that good-rated municipalities are not willing to be pooled with low-rated ones. It has also given a feedback to government on giving tax incentives for municipal bonds to work, but there was no announcement to that effect in the budget. The bond market will have to wait for the next budget for this,” said the first of the two persons cited earlier.

The process is likely to be time-consuming, further delaying the growth of the market.In March, ratings of 94 cities, which are part of Smart City Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT), were detailed by the ministry of housing and urban affairs. Of these, 55 cities got investment grade rating (BBB- and above), while other 39 were rated below BBB-.

“Pooled mechanism can help lower rated urban local bodies to come together and issue bonds. Investors can take comfort from the fact that there is diversification of revenue sources to service debt. This mechanism was also used in 2003 in Tamil Nadu,” said Subodh Rai, senior director at Crisil Ratings

Last month, Greater Hyderabad Municipal Corporation (GHMC) raised Rs200 crore by selling municipal bonds. The bonds, rated AA, were priced at a coupon of 8.90%, which will be paid twice in a year.This was followed by a similar issuance by Pune Municipal Corporation (PMC) in June 2017. The civic body raised Rs200 crore, marking the comeback of municipal bonds after at least 14 years. PMC’s bonds were rated AA

At least five other civic bodies with investment grade ratings are in discussions to sell municipal bonds worth Rs1,000 crore in the next six months, according to bond dealers who requested not to be named.“Structuring of bonds by securitizing revenues through an escrow mechanism can help ‘A’-rated ULBs (urban local bodies) get a credit enhancement and access to the capital market. For instance, property tax collections could be securitized and kept in an escrow account.

Bond holders will have first right on the escrow account as far as debt servicing is concerned,” said Crisil’s Rai. The rating agency expects Rs6,000 crore of municipal bond issuances over next three fiscals.

The Mint, New Delhi, 13th March 2018

Data storage norm splits digital payments industry

Data storage norm splits digital payments industry India’s nascent digital payment industry could be thrown into disarray due to the demand by the Reserve Bank of India (RBI) that all user data be stored within the country, fears an industry grouping, which has termed the decision as “heavy-handed”, even as others, including the country’s largest digital payment provider Paytm, have hailed the move. In a bid to narrow the growing schism, the industry is planning to send a formal representation to the regulator highlighting its concerns, a top official told ET. “We are trying to build a consensus on the issue," said the person adding that the representation to the central bank will be ready this week. RBI on April 6, mandated all payment companies—global and local—to set up data storage facilities within India by October. The stringent six-month deadline has attracted the ire of several sections of the industry that fear it will lead to a disruption of wel...

Offer’s for all of you

Great Bumper Dhamaka Offer’s for all of you... It's Time to see your Business Online, WebeCreator Offer Website Designing with domain & Email @ nominal charges. For a year For More information visit us http://goo.gl/KlpppF call on 9890151261/9773197533 drop a mail to sales@webecreator.com

Sebi to finalise options in commodities today

The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement. The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations. According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options. In the equity segments, options ar...

CA Online

Search This Blog