UP leads municipal bond boom: VNN raises ₹50 cr through its first bond issue
The bond issue, conducted via private placement on the National Stock Exchange’s Electronic Bidding Platform, attracted substantial investor interest
Varanasi Nagar Nigam (VNN) has entered the municipal bonds club by raising ₹50 crore through its first municipal bond issue at a coupon rate of 8.01%, marking the lowest rate secured by any municipal corporation in Uttar Pradesh till date.
The bond issue, conducted via private placement on the National Stock Exchange’s Electronic Bidding Platform, attracted substantial investor interest, making Uttar Pradesh the first state in India to have five Urban Local Bodies (ULBs) – Lucknow, Ghaziabad, Agra, Prayagraj, and now Varanasi – successfully raise funds through municipal bonds.
Strategic infra dev for ancient city
The funds raised will finance two major revenue-generating projects aimed at enhancing infrastructure in Varanasi, one of India’s most visited pilgrim destinations, which attracts millions of domestic and international tourists annually.
“Varanasi being a premier spiritual and cultural destination requires world-class infrastructure that preserves its ancient character while meeting modern needs,” said Amrit Abhijat, principal secretary, urban development department.
“The overwhelming investor response to these bonds reflects growing confidence in the city’s economic potential and our governance structures. With this milestone, Uttar Pradesh has established itself as the national leader in municipal financing with five ULBs successfully tapping the bond market.”
The first project involves developing a hotel complex with underground parking near Sigra Stadium, estimated to cost ₹40.52 crore with ₹25 crore allocated from the bond funds. The second project will create a market complex with underground parking at Lahurabir Road at an estimated cost of ₹34 crore, also receiving ₹25 crore from the bond proceeds.
Employment and revenue generation
These initiatives will generate employment for over 500 people and bring an annual revenue of approximately ₹8-9 crore to the Varanasi Nagar Nigam, strengthening financial self-sufficiency. The hotel complex near Sigra Stadium aims to provide world-class amenities for tourists and athletes while leveraging its strategic location near both the stadium and temple complexes to serve sports and religious tourists. The market complex at Lahurabir Road will address local commercial needs while helping to ease the city’s traffic congestion through its parking facilities.
What is coupon rate?
In the bond market, the coupon rate is the fixed annual interest rate that a bond issuer agrees to pay to bondholders, based on the bond’s face value. Set at the time the bond is issued, this rate does not change over the bond’s lifespan. It determines the regular interest payments—known as coupons—that investors receive, playing a crucial role in how bonds are priced and evaluated by potential investors.
