The Hindu : Tamil Nadu / Chennai News : Metrowater floats bonds to fund new project

Online edition of India's National Newspaper
Tuesday, Jun 21, 2005

Tamil Nadu

Tamil Nadu - Chennai

Metrowater floats bonds to fund new project

T. Ramakrishnan

Interest slightly higher than last year, full subscription expected

CHENNAI: Encouraged by the "success" of its first tax-free municipal bonds last year, Chennai Metrowater has again issued bonds worth Rs. 50 crores.

Floated through private placement, the bonds carry an interest rate of 5.45 per cent and are repayable in seven years. The proceeds mobilised through the bonds are to be used for the partial funding of a water treatment plant at Chemparampakkam with a capacity of 530 million litres a day (MLD).

The placement will be closed on June 23. "Till now, we have mopped up Rs. 18 crores," says a senior Metrowater official, hoping that the subscription would be full this time too.

The floating of the bonds follows the approval given by the Department of Economic Affairs in the Union Finance Ministry.

Canara Bank is the sole arranger and the debenture trustee. Metrowater has obtained AA (so) rating from the Credit Rating and Investment Services of India Limited (CRISIL), depicting a strong stand-alone credit quality and high safety for the investor. Compared to last year's bonds, the interest rate now is marginally higher — by 0.25 percentage points.

Still, this is the lowest coupon rate, as in the case of the previous bonds, the official says , adding that regional rural banks, cooperative banks and insurance companies are among those who can subscribe to the bonds.

Being tax free, the instrument's effective yield will be 8.22 per cent, the official adds.

The Chembarampakkam treatment plant project is estimated to cost Rs. 220 crores, of which the Tamil Nadu Urban Finance and Infrastructure Development Corporation loan accounts for Rs. 100 crores, financial institutions Rs. 42 crores and the French Government's assistance Rs. 28 crores. The remaining Rs. 50 crores will be met through the mobilisation from the bond issue.

Work on the project is likely to be completed by the end of this year.

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