Growing economic base, efficient operations, and service delivery track record

IMC is the largest municipal corporation in the state of Madhya Pradesh and is witnessing growing industrialisation. IMC, along with its special purposevehicle SPV, Indore Smart City Development Ltd 50 Percent held by IMC and 50 Percent by the Madhya Pradesh Government, is engaged in augmenting the core infrastructure requirements, viz, adequate water supply, assured electricity supply, sanitation, which includes solid waste management, efficient urban mobility and public transport, affordable housing, etc.

IMC has a strong track record in terms of coverage and service delivery, with about 100 Percent coverage of solid waste, sewerage, and stormwater drainage. IMC is the first urban local body ULB in India to set up waste management under the public private partnership PPP model and has been ranked as the cleanest city in the country six times consecutively by the Ministry of Urban Development MoUD in its Swachh Survekshan Survey. Although there are shortfalls in the coverage of water supply, the corporation is likely to address the same going forward.

Satisfactory financial performance

The RRs have witnessed continuous growth over the period FY17 FY22 except FY21, with growth led by non tax revenue components, revenue grants devolution from the state government, and assigned revenue. The RRs in FY21 were impacted due to the COVID 19 pandemic related challenges

IMC has reported a consistent revenue surplus over the said period and with a reduction in debtors built up over the years, the adjusted revenue surplus has witnessed a CAGR of around 30 Percent during the said period from 153 crore in FY17 to 440 crore in FY22. Revenue surplus RRs has also been comfortable at an average of around 25 Percent.

Structured payment mechanism

IMC is following a structured payment mechanism SPM for the existing bonds and has proposed the same for the new bond issuance. The proposed bonds are in the nature of green bonds, to be placed as a public issue.

The SPM entails the creation of an escrow account of designated own revenue collections defined as revenues cash flows being directly levied and collected or recovered by the IMC with priority for servicing of bonds. Under the SPM, collections under the own revenue heads viz, tax revenues property tax, water tax, advertisement tax, etc, rental income, fees and user charges, sale and hire charges excluding betterment tax and building permission fee will be transferred to a separate escrow account.

Comfortable financial position

IMC has a track record of fundraising from banks and financial institutions FIs to fund its capex plans and had an outstanding debt of 579 crore as of March 31, 2022. While the debt levels have witnessed an increase over the past five years, the same has been complemented by growth in the revenue surplus. This has enabled the corporation to maintain healthy coverage metrics with debt surplus below 2x as on March 31, 2022. The debt service coverage ratio DSCR is also expected to remain at a comfortable level for the corporation, based on the current borrowings and capex plans.