Review of Public Issue of Green Bonds by Indore Municipal Corporation

Indore Municipal Corporation (IMC) is the chief municipal body of Indore city. Indore is the most populous and largest city in the Indian state of Madhya Pradesh. It serves as the headquarters of both the Indore District and the Indore Division. The IMC has started various green initiatives like 100% segregated door-to-door waste collection, processing of dry and wet waste, bioremediation of legacy waste, etc.

For the year 2022, IMC has also been a recipient of Swachh City of India and Garbage Free City from the Ministry of Urban Development, Govt of India. IMC has received several such awards over the last few years. In furtherance of this legacy, IMC is raising Green Bonds for an amount up to Rs. 244 crs for the installation of a 60 MW Ground Mounted Captive Solar PV Power Plant at Village Samraj & Ashukhedi, District Khargone in Madhya Pradesh. This issue is not backed by any guarantee of the State Government of Madhya Pradesh or the Central Government.

What Is a Green Bond?

Green Bonds are debt instruments issued by entities for financing projects that have a positive effect on the climate or the environment. Some green bonds carry tax benefits or exemptions with them. However, the current issue by IMC doesn’t have any tax benefit to the NCD holders with respect to interest income or capital gains.

About the Issue

IssuerIndore Municipal Corporation (“IMC”)
Type of InstrumentListed, secured, redeemable, non-convertible
Issue SizeRs. 122 crs + Rs. 122 crs (Green shoe option)
Face Value₹1,000 per NCD comprising of
1 STRPP A of Face value of ₹ 250,
1 STRPP B of Face value of ₹ 250,
1 STRPP C of Face value of ₹ 250 and
1 STRPP D of Face Value of ₹ 250
Security Name8.25% IMC STRPP A 2026
8.25% IMC STRPP B 2028
8.25% IMC STRPP C 2030
8.25% IMC STRPP D 2032
Maturity/RedemptionSTRPP A – 3 years
STRPP B – 5 years
STRPP C – 7 years
STRPP D – 9 years
Coupon8.25% p.a. payable half yearly
Yield8.41% across all STRPPS
Application sizeMinimum 10 NCDs and in multiples of 1 NCD thereafter
Security CoverMinimum 125% security cover on the principal outstanding plus interest thereon
Chargea) first pari passu charge over the present and future receivables pertaining to own revenues (i.e., tax revenues, fees and user charges, rental income, sale and hire charges excluding betterment tax and building permission fee) along with bondholders of 9.25% IMC Series I-June 2028 Bonds.
b) first pari passu charge over the Escrow Account maintained with Kotak Mahindra Bank.
c) Exclusive charge over the Interest Payment Account (including the DSRA Amount) and Sinking Fund Account.
d) Exclusive charge over the investments made in terms of ‘Structured Payment Mechanism’ and the investments made by utilizing the AMRUT Incentive 
Credit RatingCARE AA/Stable and IND AA+/Stable
Issue Open Date10-Feb-2023
Issue Close Date14-Feb-2023

STRPP Structure:

STRPP means “separately transferable and redeemable principal parts”. This structure enables to the division of a single security in multiple parts which can then be traded separately. In the current issue, once the bonds are listed, even though you purchased all four STRPPs – A, B, C and D collectively, you can later trade/transfer them separately.

About the project

IMC has been selected by the Ministry of New and Renewable Energy (MNRE) for setting up a solar photo voltaic power project with an allocated capacity of up to 100 MW with viability gap funding support. The Issuer proposes to install a 60 MW Ground Mounted Captive Solar PV Power Plant on identified land with a total area of 210.84 acres (an area of 165.2 acres and 45.64 acres, respectively, at Village Samraj and Ashukhedi, respectively). The said identified land has been allotted to IMC on a lease basis by the Collector, Khargone, for the purpose of setting up the Project on an annual land rent of Rs. 0.05 crores. The allotment of land shall remain valid till the duration of the operation of the said Project.

Total Project Cost:

Particulars(Rs in crs)
Land, Civil, electrical, and Mechanical works (incl GST)299.77
Preliminary / Pre-operative expenses5.23
*Out of the total cost of the project, at least 20% will be contributed by the issuer from its internal resources or grants, which may be in cash or kind

Financial Performance

  • The primary sources of revenue for a municipal corporation include taxes, grants and assigned revenue from the Government, other fees and charges, and income from investments.
  • The expenditures of a municipal corporation include administrative expenses like salaries and wages, rent, and expenditures on public services, among others.

Key Financial Metrics are mentioned below:

Balance Sheet:

(Rs in crs)

Own Funds/Net Worth  4,152.11   4,616.16   4,994.85 
Debt      354.18       648.45       579.43 
Other Liabilities613.51727.27799.23
Total Sources of Funds/Liabilities5,119.805,991.886,373.51
Fixed Assets  3,487.96   3,655.38   3,724.69 
Cash and Bank Balances234.69   473.81  372.95 
Other Current Assets1162.651599.781959.51
Other Assets234.50262.91316.36
Total Application of Funds/Assets5,119.805,991.886,373.51

Income & Expenditure:

(Rs. In crs)

Own Revenue      846.42       741.53       898.27 
Grants & Assigned Revenue      828.94       823.41       909.16 
Total Revenue  1,675.36   1,564.94   1,807.43 
Establishment Expenses      413.42       417.29       430.34 
Operations & Maintenance      376.76       390.11       514.27 
Depreciation      244.62       250.12       274.96 
Administrative expenses        57.99         63.50         82.65 
Other Expenses      243.97       103.80       116.05 
Surplus (Profit)      338.60       340.12       389.16 


Debt/Own Funds (x times)
Own Revenue/Total Revenue (%)50.52%47.38%49.70%
  • IMC has maintained a favourable debt/own funds ratio within the range of 0.09x to 0.14x over the last 3 years. 
  • Further, the municipal corporation has been regularly reporting surplus, i.e. its income exceeds its expenditure, for the last 3 FYs with a cumulative surplus of Rs. 1,067.89 crs. 
  • However, around 50% of its revenue comes from the various grants and compensations received from the Central & State Governments. Around 29% of the revenue receipts of IMC for the last 3 years received from the State Government of Madhya Pradesh comprises GST compensation.
  • The tax collection ratio has been moderate in the last 3 FYs, with the current demand collection ratio being 68.34% in FY20, 54.53% in FY21, and 67.17% in FY22.


The borrowings outstanding as on December 31, 2022:

(Rs in crs)

LenderAmount SanctionedAmount Outstanding
Housing and Urban Development Corporation Limited18.256.73
Housing and Urban Development Corporation Limited52.424.02
Asian Development Bank352.59105.78
National Safai Karamcharis Finance and Development Corporation12.219.86
NCD – June 2018139.90139.90

Structured Payment Mechanism

IMC is following a structured payment mechanism (SPM) for its earlier issuance and is proposing the same for the current issue. 

SPM necessitates the IMC to create a first pari passu charge and escrow mechanism in favour of the bondholders on the own revenues of IMC along with the existing holders of 9.25% of Indore Municipal Corporation Series-I June 2028 bonds. The debenture trustee, on behalf of the bondholders, will have first pari passu charge (along with the existing bondholders) over the escrow account into which the own revenues/cashflows will be transferred for debt servicing. The escrowed revenues transferred in the escrow account will be available proportionately (140:244) for debt servicing requirements of the existing bond issue and the proposed bond issue.

Features of SPM include:

  • Total amounts collected in the Escrow Account in any financial year shall be at least 2 times of the Annual Payments Amount, which includes interest and principal wherever applicable.
  • The amount shall be transferred from the Escrow account to the interest payment account (IPA) for interest payments and the sinking fund account (SFA) for principal repayment, as mentioned below.
  • For every half-yearly interest payment, 20% of the interest is to be transferred to the IPA created for this bond issuance, as follows:
    • 1st half year – from 1st to 5th Month
    • 2nd half year – from 6th to 10th Month
  • For STRPP A, 3.33% of the principal amount will be transferred each month for 10 months in the 1st, 2nd, and 3rd year to SFA to be created for this bond issuance.
  • For STRPP B, C, and D, 5% of the principal amount will be transferred each month for 10 months in the 4th & 5th year, 6th & 7th year, and 8th & 9th year, respectively.


  • Strong Financials with consistency in reporting surplus
  • Escrowed cash flows for debt servicing
  • Structured Payment Mechanism


  • Possibility of untimely execution of project and cost overruns
  • Timely receipt of grants and incentives from the Government
  • Moderate tax collections
  • Illiquidity of Green Bonds on the stock market
  • Non applicability of SARFAESI
  • Political risks
Credit Principal at Wint Wealth
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The article may also contain information which are the personal views/opinions of the authors. The information contained in this article is for general, educational and awareness purposes only and is not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision, whether related to investment or otherwise, taken on the basis of this article.

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