After a gap of a few years, one more civic body is tapping the debt market. Nashik Municipal Corporation is raising Rs 15 crore (Rs 150 million).

The last civic body to raise money from the public was Hyderabad Municipal Corporation. The issue assumes significance as the urban local body has decided to tap the market when the state government has defaulted on its debt obligations.

Nashik Municipal Corporation has the highest self-reliance among most of the municipal bodies. The revenue generated on its own accounts for almost 99 per cent of the civic body's total revenue, which also includes government grants.

Despite low interest rates, there was not a single issue from any UCB during 2002.

The coupon rate of the Nashik civic body's five-year issue is 7.75 per cent -- 244 basis points higher than a comparative maturity government paper.

Compared to highly liquid five-year corporate bonds, Nagpur Municipal Corporation's coupon is higher by 195-200 basis points.

Incidentally, NMC had paid almost 14 per cent for the five-year paper when it tapped the market the last time.

While Rs 10 crore (Rs 100 million) is being raised through taxable bonds, another Rs 5 crore (Rs 50 million) will come through tax-free bonds.

Both the bond programmes have been assigned 'AA (SO)' by rating agency Crisil.

This is based on the corporation's strong stand-alone credit quality and credit enhancement mechanisms provided for in the form of an escrow of the corporation's revenue streams.

The revenues are expected to flow from increased octroi collections and lower capital expenditure on the Kumbh mela and Godavari Action plan.