High Yield | AA+/Stable Rated | Minimum Investment: 10k Only
Bond overview
Indore Municipal Corporation is issuing the Non-Convertible Debentures. These NCDs are AA+/Stable rated by India Rating and Research Private Limited and AA/Stable by CARE. The NCDs are being issued in 4 STRPPs: yield ranges from 8.41% to 8.42% p.a. and different tenures of 3 years, 5 years, 7 years, and 9 years. The NCDs are secured and redeemable in nature.
Issue related details for each of the series
Allocation Ratio
The allocation ratio is prepared based on norms laid down by SEBI. Before announcing the allocation ratio, the same has to be approved by SEBI. Once the IPO subscription closes, applications will be divided into different categories. The category-wise allocation ratio is always decided and declared during the launch of the particular IPO. Considering the Allocation Ratio, units will be assigned to applicants. Refer to the chart to know the application ratio for IMC NCD-IPO.
Investment Process for IMC NCD IPO
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If the investment amount is less than & up to 10 lakhs, retail investors can apply for an IPO online.
If the investment amount is more than 10 Lakhs.
Issue analysis
- Adequate Liquidity– With reasonable income surplus creation, moderate cash and balances of $373 crore as of March 31, 2022, and loan payback requirements of 61 crore in FY23, IMC’s liquidity position is adequate.
- These are secured securities.
- The issuer is offering high coupon rates, when compared with FD rates.
Security
- First pari-passu* charge with a minimum cover of 1.25 times the total amount borrowed, plus interest and other costs, over all current and future receivables related to the Issuer’s own revenues (including tax revenues, fees and user charges, rental income, sale and hire charges, excluding betterment tax and building permission fee).\
- The investments made in accordance with the “Structured Payment Mechanism” for the Issue and the investments made with the help of the AMRUT Incentive (“Permitted Investment(s)”) are subject to exclusive charge.
*Pari-passu, which means “equal footing” in Latin, is a type of financing where each lender has an equal claim to the assets used as collateral for the loan. The assets may be auctioned if the borrower is unable to meet the payment obligations, and each lender will simultaneously get an equal portion of the revenues.
Financial Overview
Snapshot stating the Revenue, Expenses, EBIT, Net Worth and PAT (In crores)
Cash flow for last 5 years (In crores)
Cash flow refers to the movement of cash in and out of the business at a specific point in time. It represents the net balance of the cash movement.
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- *Cash flow from operating activities reflects the amount a company generates through its product of services.
- **Cash flow from investing activities reflects cash generated and spent relating to investing activities, like purchase of assets, sales of securities etc.
- ***Cash flow from financing activities gives an insight into the financial stability of a company to its investors. It reflects the net flows of cash that are used to fund the company.
Ratio Analysis
- Considering the debt servicing requirements from the issuance, IMC’s DSCR is anticipated to remain favorable over the medium term.
- IMC anticipates receiving a financial reward from the Indian government for the bond offering. The aforementioned incentive (as and when received) will be used to form fixed deposits, and the funds from those fixed deposits will be proportionately used for coupon payments during the whole tenor of NCDs.
- Debt obligation can be covered through revenue income generated by IMC as the ratio remains close to 2%.
To get better returns than Bank FDs, invest in NCD-IPOs online.
About Indore Municipal Corporation
Indore Municipal Corporation is the city’s principal municipal authority, having been established in 1956. Currently, it operates in accordance with the 1956 Madhya Pradesh Municipal Corporation Act. IMC is protected by the AMRUT Scheme of the Indian Government.
The Corporation is primarily in charge of providing civic services to the city of Indore, and it works on a variety of projects, including lighting public streets, places, and buildings, cleaning public streets, places, and sewers, registering births, marriages, and deaths, maintaining public parks and gardens, managing all municipal water works, building and maintaining new work, and finding ways to supply both public and private purposes.
Strengths
- IMC, the biggest municipal corporation in Madhya Pradesh, is experiencing an increase in industrialization.
- According to the structure, the Interest Payment Account would be filled one day before the date of allocation with an amount equal to two half-yearly interest payments (necessary DSRA amount), and the aforementioned DSRA amount would be maintained at all times.
- The debenture trustee will keep an eye on the IPA and SFA, which must only be used to pay the bondholders’ dues.
- Regular Revenue Surplus
Weakness
- Modest tax collecting efficiency and a lower own source of income Regular Revenue Surplus
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