How Andhra Pradesh's Amaravati project got a shot in the arm amid its ongoing fight with Centre
The bonds issued to raise funds for the construction of capital Amaravati generated overwhelming response.
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Barely weeks after Andhra Pradesh was ranked No 1 on the Ease of Doing Business index among states, by the government of India, the state has received a shot in the arm with the welcome response to the issue of bonds in order to raise funds for its green field capital Amaravati.
The Amaravati Bonds 2018 issued by the government entity, Andhra Pradesh Capital Region Development Authority (CRDA), the nodal agency for the construction of Amaravati, was subscribed 1.5 times on the electronic bidding platform of the Bombay Stock Exchange on August 14.
The Amaravati Bonds 2018 was subscribed 1.5 times on the electronic bidding platform of the Bombay Stock Exchange on August 14.
The bonds for institutional investors were issued for Rs 1,300 crore and snapped up Rs 2,000 crore in an overwhelming response, to be oversubscribed 1.53 times as institutional investors lined up to the buy bonds, in an hour.
The 10-year issue was offered at a fixed interest rate of 10.32 per cent per annum, paid quarterly, with a five year moratorium on principal payment, which is redeemed on a yearly basis for the next five years at 20 per cent every year.
The issue guaranteed by the state government was rated by CRISIL, Brickwork and Auicte Ratings and Research, while AK Capital Services has acted as the sole arranger.
“This response shows the faith the investors have reposed in the Andhra Pradesh government, the chief minister and the way our government is functioning,” said APCRDA Commissioner Ch Sridhar, buoyed by the capital market’s faith in the state’s plans.
“We are delighted and hope that in about three months from now, Amaravati bonds would be issued for retail investors too.”
The state is planning for a public issue of bonds by October. In all, he plans to mobilise up to Rs 10,000 crore through various bonds for the capital’s construction.
CRDA termed the issuance “the biggest ever in the country since Independence by an urban local body".
Raising funds through the bonds route is the key to APCRDA’s financial planning as it offers the flexibility to deploy funds to multiple works.
These funds are vital to making swift progress in green field projects and realise the potential of development works. Chief Minister N Chandrababu Naidu had mandated APCRDA to explore “innovative approaches” to financing the capital city.
Sridhar said that projects worth over Rs 27,000 crore are underway and those worth Rs 11,000 crore are ready to be awarded.
Various options are being explored to mobilise funds for Chandrababu Naidu's 'dream city'.
This development comes at a time when the ruling TDP has severed ties with the BJP in Delhi and are virtually at loggerheads protesting lack of support and deciding to mobilise required funds from the open market.
“The bonds issue oversubscription has helped us raise Rs 2,000 crore surpassing the cumulative funds of Rs 1,800 crore raised by various municipalities across the country till date,” emphasised Cherukuri Kutumba Rao, Vice Chairman Andhra Pradesh State Planning Board.
“We have decided to exercise the green shoe option and retain the oversubscribed amount of Rs 700 crore as equity pool and keep investing towards equity contributions for various infrastructure projects at Amaravati through special purpose vehicles.”
Works in the capital region have gathered momentum and the total investment required in the first phase is estimated currently at Rs 48,000 crore. Various options are being explored to mobilise funds for what Chandrababu Naidu has envisioned as a dream city. His government had assembled over 33,000 acres required for it through a voluntary land pooling scheme from over 27,000 farmers.
Giving it some shape before the Assembly elections, due in less than a year, is crucial to ensure that their dreams are not shattered even if Naidu is unable to keep all his promises in capital construction.
It is equally important for him to win the election too for a second term in a row to fulfil more of what he has promised.
(Courtesy of Mail Today)