Surat Municipal Corporation NCD Issue: Should You Invest in Surat Municipal Corporation Bonds?
The Surat Municipal Corporation (SMC), one of the most financially robust civic bodies in India, has announced its Non-Convertible Debenture (NCD) issue. This move comes as part of its ongoing efforts to raise capital for infrastructure development, smart city initiatives, and urban growth projects. The issue is expected to attract strong participation from institutional as well as retail investors due to the corporation’s credibility and credit ratings.
The Surat Municipal Corporation (SMC) has launched a public issue of Secured, Listed, Redeemable, Non-Convertible Green Municipal Bonds (NCDs), rated CRISIL AA+/Stable. Open from October 6-9, 2025, the issue offers a high degree of safety and an attractive effective yield of up to 8.16% for tenors of 4 and 5 years. Invest in these Green Bonds to earn fixed income and fund critical urban infrastructure projects, including solar and waste management initiatives in Surat.
What Are NCDs?
Non-Convertible Debentures (NCDs) are fixed-income instruments that cannot be converted into equity shares. Investors receive fixed interest payments at predetermined intervals, making them a stable investment choice for those seeking predictable returns.
Key Highlights of the Surat Municipal Corporation NCD Issue
The Surat Municipal Corporation is raising capital through the public issue of Secured, Listed, Redeemable, Non-Convertible Green Municipal Bonds (NCDs/Debentures).
- Issuer: Surat Municipal Corporation
- Instrument Type: Non-Convertible Debentures (NCDs)
- Use of Funds: Infrastructure development, smart city projects, renewable energy, water supply, waste management, and urban mobility solutions
- Credit Rating: Expected to be high due to the strong financial standing of SMC
- Target Investors: Institutional investors, HNIs, and retail investors
- Objective: The net proceeds are earmarked for Green Projects including:
- Installation of a 10 MW ground-mounted solar power plant.
- Installation of a 6.3 MW wind power plant.
- Development of a depot for electric bus operations.
- Construction of a Centralized Dry and Wet Waste processing plant.
- Augmentation and upgradation of Water Treatment Plants (WTPs) at Variav and Rander.
- Issue Size: Up to ₹200 Crore (₹100 Crore Base Issue + ₹100 Crore Green Shoe Option for oversubscription).
- Key Dates (October 2025 Issue):
- Issue Opens: October 6, 2025
- Issue Closes: October 9, 2025
- Instrument Type: Secured, Listed, Redeemable, Non-Convertible Green Municipal Bonds. The NCD is split into two components, STRPP A and STRPP B.
- Face Value: ₹1,000 per NCD (comprising ₹500 for STRPP A and ₹500 for STRPP B).
- Minimum Investment: ₹10,000 (10 NCDs).
- Tenor:
- STRPP A: 4 Years
- STRPP B: 5 Years
- Coupon Rate/Effective Yield: The coupon rate is 8.00% per annum (paid Half-Yearly), with an effective yield of up to 8.16%.
- Credit Rating: The bonds have a strong rating of ‘Provisional IND AA+/Stable’ from India Ratings and Research Private Limited and ‘Provisional CRISIL AA+/Stable’ from CRISIL Ratings Limited, indicating a high degree of safety and very low credit risk.
- Structured Payment Mechanism: The servicing of the debt obligations is secured by the escrow of revenues from property tax, fees, and user charges, which is expected to provide strong debt service coverage. A Debt Service Reserve Account (DSRA), Interest Payment Account (IPA), and Sinking Fund Account (SFA) are part of the payment mechanism.
Why Surat Municipal Corporation?
Surat is one of India’s fastest-growing cities, known as the “Diamond City” and “Textile Hub of India.” The city generates significant revenue through industries, property taxes, and state support, making SMC one of the most financially stable municipal corporations in the country. This financial strength boosts investor confidence in the NCD issue.
Benefits for Investors
- Stable Returns: NCDs offer fixed interest rates, making them attractive for conservative investors.
- Tax Benefits: Certain municipal bonds may provide tax exemptions under Section 10(15)(iv)(h) of the Income Tax Act.
- Credibility of Issuer: SMC has a strong track record in managing funds and delivering infrastructure projects.
- Diversification: Municipal bonds and NCDs add diversification to a fixed-income investment portfolio.
Risks to Consider
- Interest Rate Risk: Rising interest rates may impact the attractiveness of fixed-coupon NCDs.
- Liquidity Risk: Some municipal NCDs may have limited liquidity in the secondary market.
- Project Risk: Funds raised will be deployed in long-term infrastructure projects, which may face execution delays.
Future Outlook
The SMC NCD issue is part of a larger trend in India where municipal bodies are tapping into debt markets for funding. With the government’s push toward smart cities and urban transformation, municipal bonds and NCDs are likely to become a more popular investment class in the coming years.
Conclusion
The Surat Municipal Corporation NCD Issue presents a unique opportunity for investors to participate in the growth story of one of India’s most dynamic cities while earning stable returns. Backed by strong financial credibility, the issue is expected to generate high investor interest. However, investors should carefully evaluate risk factors, compare yields, and consult with financial advisors before investing.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. Investors are advised to consult certified financial advisors before making any investment decisions.)
