The Mumbai Metropolitan Region Development Authority (MMRDA) is seeking a state government guarantee to issue bonds valued at ₹14,000 crore to finance critical infrastructure and development projects.
This initial bond issuance will encompass ₹1,400 crore, with the remaining amount planned based on the first tranche’s performance. In July, the MMRDA received approval to raise up to ₹50,000 crore through bond issuance for various infrastructure projects in Mumbai and surrounding areas. These bonds, categorised as secured, rated, redeemable, and taxable non-convertible debentures (NCDs), will benefit from an unconditional and irrevocable guarantee from the state government.
The MMRDA has funded public projects by auctioning plots in the Bandra-Kurla Complex (BKC), primarily to developers for commercial purposes. With most of these plots now utilised, the MMRDA is pivoting to bond issuance to generate necessary funds. The raised funds will focus on improving mobility, housing, and essential services within the densely populated Mumbai Metropolitan Region (MMR). The bonds will be issued on a partly paid-up basis and are planned to be listed on stock exchanges upon fulfilling regulatory requirements.
Each bond, tentatively valued at ₹1 lakh, will be secured by mortgages on specific MMRDA-owned land parcels, with current valuations offering more than double the required security cover. The state government’s guarantee provides additional assurance to bondholders regarding both principal and interest payments. To ensure liquidity and manage interest payments, the MMRDA plans to establish an Interest Service Reserve Account (ISRA). This reserve will be instrumental in addressing unforeseen issues, particularly those related to land asset monetisation.
The proposed debentures are set to have a tenure of 50 years, with a call option allowing redemption at par after 15 years, and annual redemption options thereafter. This strategy, leveraging both asset backing and government support, could set a significant precedent in regional infrastructure financing. A successful bond issuance could transform public infrastructure funding in India, providing new avenues for large-scale projects through capital markets. The MMRDA, which currently lacks tax revenue generation capabilities, is also looking to raise funds through land deals and monetisation of its assets, including its Metro network. The ₹60,000 crore loan limit, alongside the bond funds, will serve as a financial buffer against potential revenue delays.
