Indore Municipal Corporation

In February 2023, the city of Indore did something no Indian city had done before. It sold bonds straight to the public. Anyone could apply, with as little as ₹10,000.

Normally when an Indian city borrows from the bond market, it quietly sells the whole issue to a few banks and pension funds. About nine out of ten municipal bonds in India work that way. Indore instead ran a proper public issue, the kind you can apply for through your broker, and raised ₹244 crore to build a solar power plant.

Three and a half years later we can stop guessing and start checking. The plant is finished. The first repayment has been made. And we can see, trade by trade, what the market actually thinks these bonds are worth.

Here is the honest picture.

What you are actually buying

This bond is put together a little unusually, so it is worth a minute.

One bond costs ₹1,000. But it is not one lump. It is split into four separate pieces of ₹250 each, and each piece pays you back in a different year: after 3, 5, 7 and 9 years. Each piece has its own code and can be bought and sold on its own.

In plain terms: think of it as four small bonds bundled together. You get interest on all four, and they mature one after another, roughly every two years. The industry calls these pieces STRPPs. You can ignore the jargon; just remember there are four of them.

Two things stand out. First, every piece pays the same 8.25%, whether your money is locked up for three years or nine. Normally you would expect to be paid more for waiting longer. Here you are not.

Second, and this matters more than most people realise, the interest is fully taxable. In the United States, municipal bonds are usually tax free, which is why Americans love them. India never copied that. So if you are in the 30% tax bracket, that headline 8.25% is really about 5.8% in your pocket.

What are they trading at right now?

This is the part almost nobody can tell you, because these bonds barely register on the public data feeds. We pull the exchange tape ourselves, so we can show you the real prints.

Over the seven and a half weeks from 1 June to 22 July 2026, here is every bit of activity in all three remaining pieces.

There is good news and bad news here, and both are worth stating clearly.

The good news: they do trade. On most days, in fact. Most write-ups of this bond assume it never changes hands at all, and that is simply wrong. Somebody is buying and selling these almost every session. They also change hands a shade below their face value, which is why the yield on offer is higher than the 8.25% coupon.

The bad news: the amounts are tiny. Across all three pieces over seven and a half weeks, a grand total of about ₹27.5 lakh traded. That is roughly 1% of the outstanding amount per year. The typical day sees a few tens of thousands of rupees. The single busiest day in the whole window was ₹2.54 lakh.

One more useful detail. Part B, the 2028 piece, yields the most at 10.32%, while Part D, the 2032 piece, yields the least at 9.16%. That is backwards from normal, where longer usually pays more. It tells you the handful of people trading these care more about getting their money back soon than about squeezing out extra yield. It is worth not reading too much into the exact top figure: Part B's last print was a single ₹2,500 lot, so a thin trade moves it around.

Where the money went, and did it work?

The whole ₹244 crore was earmarked for one thing: a 60 megawatt solar farm to power the pumps that lift drinking water from the Narmada river up to Indore.

This is a genuinely sensible idea. Indore sits about 500 metres above the river, and pumping water uphill is by far the biggest item on the city's electricity bill, running around ₹22 to 25 crore a month. Build your own solar farm, and you stop paying someone else for that power.

So did they build it? Yes. And unlike most of what has been written about this bond, we are not taking a press release's word for it.

And the money was all spent on it. Indore's End Use Certificate filed with the exchange confirms the full ₹242.40 crore of net proceeds (₹244 crore less ₹1.60 crore of issue costs) went into the solar plant, and that the plant started commercial operations on 3 March 2026.

The final build cost was ₹271.16 crore, comfortably under the ₹305 crore that was approved. Cost overruns are the normal fate of Indian infrastructure. This one came in under budget.

What was actually built

The tender documents let us be precise about what your ₹244 crore bought.

The electricity is used by Indore itself rather than sold. The tender reserves capacity of about 62,500 kVA across three drawing points, the largest being the Jalud pumping station and the Bhaklai filter plant, with the balance going to Indore's city connections. The power roughly matches the load it was built to serve.

Who built it, and why that still matters

The contractor is Rays Power Infra Limited, a Jaipur-headquartered solar builder founded in 2011. It is a substantial firm: revenue of ₹1,221 crore in FY25, around 1,771 MW of solar built across 13 states, and an order book of roughly ₹8,000 crore. It filed for a ₹1,150 crore stock market listing in October 2025.

On this job it performed. The plant works, it was certified by the electricity board, and it came in under budget. But two things are worth knowing.

First, you are stuck with them for ten years. The contract includes a decade of full maintenance, right down to washing the panels weekly. The savings that justify this project depend on that maintenance actually happening. So the contractor's health matters to Indore's finances well beyond the build.

Second, its own IPO filing discloses a fair amount of trouble. None of this is speculation; the company published it about itself because the law requires it.

One more angle worth noticing: Indore was a very large customer for this contractor. Rays' revenue from government bodies jumped from ₹11 crore in FY24 to ₹306 crore in FY25, almost entirely from this project and one other. That cuts both ways. It meant real focus on finishing the job, and it means Indore was a meaningful chunk of one builder's book.

But it took far, far too long

Here is the part that should temper your enthusiasm. Indore collected the money in February 2023. The plant did not switch on until March 2026. Three years and eleven days.

The original plan, in the offer document investors read, was to have it connected to the grid by March 2024. It arrived two years late.

Worse, look at what was happening when the money was collected. The construction contract had already failed to attract a workable bid twice. Three weeks after taking the public's money, Indore put the tender out for a third time. A contractor was not actually appointed until July 2024, seventeen months after investors paid up.

For those seventeen months, Indore was paying 8.25% on ₹244 crore that had nothing to do. That is roughly ₹20 crore a year in interest on idle money, ultimately borne by Indore's taxpayers.

We can now show exactly how slowly the money moved, because a chartered accountant certified the figure to the debenture trustee every reporting period.

One thing these certificates never say is where the unspent money was sitting. Not one of the six discloses whether it was in fixed deposits, government securities or a current account, and none reports a rupee of interest earned on it. The audited accounts do not separately trace it either. So the genuine cost of the delay, net of whatever the idle cash was earning, cannot be established from anything Indore has published.

None of this cost bondholders a rupee. You were paid your 8.25% throughout. But it is a matter of record on how this borrower plans and executes.

The full story, in order

• 29 Jun 2018Indore sells its first bond, ₹139.90 crore at 9.25%, privately to institutions. Buyers include the MP pension fund for local bodies, the state electricity board's provident fund, and the Food Corporation of India's provident fund.
• 26 Sep 2022The Mayor-in-Council approves a public green bond.
• Sep–Oct 2022First attempt to hire a builder fails. Bids were due 28 October 2022. Solar panel prices were near their post-Covid peak and the qualification bar was steep.
• Dec 2022Second attempt fails too. Bids due 16 December 2022. Indore is now about to raise public money for a project that twice could not attract a workable builder.
• 6–7 Dec 2022The city council approves the issue. The Madhya Pradesh government signs off the next day, while explicitly refusing to guarantee it.
• Dec 2022India Ratings assigns AA+ to the bond but only A+ to the city. CARE assigns AA to both. SEBI clears the offer document; NSE gives listing approval.
• 10–14 Feb 2023The issue opens to the public. Applications come in at 5.91 times the ₹122 crore base size, though only 2.95 times the ₹244 crore finally raised. Indore keeps the maximum.
• 20–21 Feb 2023₹244 crore raised and listed on NSE. India's first public municipal green bond is live.
• 9 Mar 2023Three weeks after taking the money, Indore issues the construction tender for the third time. The first two attempts had failed. There is still no contractor.
• 23 Aug 2023First interest payment made on time. Payments continue every February and August without a miss.
• 24 Dec 2023Foundation stone laid remotely by the Prime Minister. Construction still has not begun.
• 31 Mar 2024The original deadline to have the plant running. Missed completely. No contractor has been appointed.
• Jul 2024Contractor finally appointed — Rays Power Infra, on a 15-month build plus 10 years of maintenance, at ₹271.16 crore against a ₹287 crore estimate. Seventeen months after the money was raised, and on the third attempt.
• 18 Jul 2024Construction actually starts.
• Oct 2024 – Oct 2025Brickwork Ratings, which Indore has stopped talking to, cuts its rating twice more. It reaches BB− and stays there.
• 27 Jun 2025First slice of the 2018 bond repaid, ₹34.98 crore, two days early. It went to the MP pension fund for local bodies (₹15.00 cr), the MP electricity board employees' provident fund (₹10.00 cr) and the Food Corporation of India's provident fund (₹9.98 cr).
• 10 Nov 2025Mayor says the plant is 97% complete.
• 3 Dec 2025CARE reaffirms AA. Notes the city's debt has grown to ₹691 crore.
• 31 Dec 2025Sinking fund holds ₹77.6 crore — comfortably more than the ₹61 crore due in seven weeks.
• 20 Feb 2026Part A repaid in full, ₹61 crore, out of the sinking fund. India Ratings withdraws the rating on it, marked paid.
• 3 Mar 2026The solar plant is commissioned, all 60 MW.
• 6 Mar 2026Electricity board issues the official commissioning certificate.
• Mar 2026First full month of generation. Reported saving on the pumping bill: ₹3.64 crore.
• 29 Apr 2026Chief Minister formally inaugurates the plant. Most press coverage dates the project from here, two months after it actually started working.
• 26 Jun 2026India Ratings reaffirms A+ for the city, AA+ for the bonds, and confirms the project "has been completed and is now operational".
• ~9 Jul 2026End Use Certificate confirms all ₹242.40 crore of proceeds spent on the plant. The money question is closed.

What actually protects your money

This is the most important section on the page, so let us go slowly.

Indore has not pledged a building or a piece of land to you. It has pledged an income stream. Specifically, the money it collects itself: property tax, water tax, advertising tax, rents and user charges. That money is swept into a special bank account that the city cannot freely touch.

From there, a trustee (Vistra ITCL, who works for you, not for Indore) moves money every month into two more accounts:

• An interest account, which is topped up a bit each month so the next interest payment is fully funded before it falls due. It also holds a full year of interest as a permanent cushion.
• A sinking fund, where the city saves up your principal in advance, year by year, rather than hoping to have the cash on the day.

Why this matters: most borrowers pay you out of whatever cash they happen to have on the day. Indore has to set your money aside in advance, in an account it does not control. That is a much stronger arrangement, and it is the entire reason these bonds are rated far above the city itself.

Does it actually work? We can now check, because Indore files the balances with the exchange. Here is what was sitting in those accounts.

We pulled every quarterly certificate Indore has filed since the bond was issued, thirteen quarters in all. This is the sinking fund, quarter by quarter, from the day the money was raised to today.

Three of those quarters increase by exactly ₹6,09,99,999, which is ₹2,03,33,333 a month. That is precisely the monthly deposit the bond documents require. Indore is not topping this up when it feels flush; it is running a standing instruction.

The interest account behaves the same way. A half-yearly coupon on the full ₹244 crore was about ₹10.07 crore, and the account never held less than ₹22 crore, reaching ₹50 crore. That is three to five times the next payment, sitting there permanently.

Every payment, checked one by one

We pulled Indore's payment confirmations from the exchange going back to the first one. Here is the complete record on both bonds.

Look at the 2018 bond's sinking fund: ₹110.26 crore against ₹104.9 crore still owed. Every remaining rupee of principal on that bond is already sitting in cash. That is an unusually comfortable position for any borrower, anywhere.

Reading all thirteen certificates together did turn up two blemishes, and it would be dishonest to show you the chart without them.

There is also a hard rule the city must obey: the money flowing through the pledged account each year has to be at least twice what it owes in interest and principal. In the six months to September 2025, Indore reported a debt service coverage ratio of 9.71 times. The requirement is 2. It is not close to the line.

The gap in the protection

Now the catch, because there is one.

Only Indore's own income is pledged to you. Every rupee it receives from the state and central governments is specifically excluded. That is a big exclusion, because grants and state compensation payments are more than half of what Indore takes in. And the largest single chunk of it, the compensation the state pays for the abolished octroi tax, is already pledged to the State Bank of India for its loans.

So you have a claim on the smaller, weaker half of the city's income, and the bank got there first on the bigger half.

The state government will not help you. It said so.

Most people assume that if a government body borrows money, the government behind it will step in. For this bond, that assumption is wrong, and it is written down.

When the Madhya Pradesh government approved the borrowing on 7 December 2022, it attached conditions. The third one says:

That is not a technicality or an oversight. It is a written refusal, in the approval document itself.

And note the contrast. Indore's older loans from HUDCO and the Asian Development Bank are guaranteed by the state government. Those lenders got a guarantee. Bond investors did not.

There is one more thing worth understanding, and it is uncomfortable.

Four rating agencies, four different opinions

Ratings look authoritative until you notice the agencies disagree with each other by a wide margin.

The single most useful thing on that table is the gap. Two agencies rate Indore itself at A+, then rate the bonds two or three notches higher. The extra notches are not because the city is strong. They are because of the escrow, the trustee and the pre-funded accounts described above.

Put simply: you are lending to an A+ borrower through an AA+ structure. If the structure ever weakened, the rating would fall towards the city's own quality, not the other way round.

India Ratings also says the bond cannot be rated above AA+ no matter how well Indore does, because there is no government guarantee behind it. AA+ is the ceiling, and it is already there.

Is Indore a healthy city, financially?

Broadly, yes. It is the biggest municipal corporation in Madhya Pradesh, it has been judged India's cleanest city eight years running, and it genuinely runs a surplus rather than limping along on grants.

Notice the third row. Indore's headline surplus looks like ₹676 crore, but roughly ₹250 crore of that is money it has billed but not collected. Which brings us to the real problem.

Indore is bad at collecting its own bills

At 30 September 2025, Indore was owed ₹2,946 crore by its own citizens and businesses. That is more than its entire annual income. It has already written off ₹905 crore of that as probably uncollectable, leaving about ₹2,040 crore it still hopes to get.

India Ratings puts it starkly: including old arrears, Indore collected just 33% of the property tax it was owed in FY26. On current-year bills alone it managed 62%. CARE quotes a friendlier 88% using a narrower definition. However you cut it, this is not a city that is good at getting paid.

And remember what secures your bond: property tax and user charges. The exact thing Indore struggles to collect. The structure works because the volume flowing through is large enough to cover debt service nine times over, not because collection is efficient.

Two details from the audited accounts sharpen this, and neither appears in any rating report we have seen.

The debt is about to grow

Indore currently owes about ₹652 crore. It has signed a ₹1,700 crore loan agreement, and Acuité notes plans to raise roughly ₹1,530 crore more for water and sewerage works. A ₹500 crore bond was put in the FY2026 budget and a ₹1,000 crore "blue bond" has been floated in the press, though neither has actually happened.

Both CARE and India Ratings list "more debt than expected" as something that would trigger a downgrade. CARE's opinion on the city is explicitly conditional on total debt staying below ₹900 crore, so the headroom between ₹652 crore today and that ceiling is a live variable.

A few other things worth knowing: Indore raised taxes in 2024 for the first time in about fifteen years and added a green tax, local reporting has documented the city struggling to pay contractors, and the FY2027 budget is the first to shrink rather than grow.

How does 8.25% compare?

The entire Indian municipal bond market is about ₹4,540 crore across 31 issues since 2017. For perspective, the American municipal bond market is around $4.17 trillion. India's is roughly seven thousandths of one percent of that size. Indore's ₹244 crore is 5% of the whole Indian market.

Two things stand out from the full list.

Rates have fallen a long way since the early issues. Hyderabad paid 10.23% in 2019 and Vishakhapatnam 10.00% in 2018. Nothing since 2022 has come close to that. Indore's 8.25% in early 2023 sat squarely mid-table for its time.

But the recent range is wider than it first looks. Issues over the past year span 7.65% to 8.50%, and the split is telling. Established repeat issuers borrow cheapest: Gandhinagar at 7.65%, Nashik at 7.80%, Pimpri Chinchwad at 7.85%, Chennai at 7.95%. First-time and smaller southern issuers pay the most: Tiruppur and Tiruchirappalli both at 8.50%, Coimbatore at 8.29%. Surat, returning to the market in October 2025 after six years, priced at 8.00%, a full 68 basis points below its own 2019 issue.

Against that spread, Indore's current market yield of 9.16% to 10.32% sits clearly above the top of what any city is paying on new issues today.

Indore is no longer the only one you can buy

When Indore went to the public in 2023 it was genuinely alone. That has changed, and it matters if you are comparing options. Two more cities have since run proper retail public issues, both green, both rated a notch above Indore's CARE rating.

The honest read on Indore's place in history is therefore narrower than the press coverage suggests. It was the first Indian city to sell bonds to the public, and the template worked well enough that Surat and Nashik copied it. But it is no longer unique, and a reader comparing municipal paper today has three issues to look at rather than one.

"No Indian municipal bond has ever defaulted"

You will see this line everywhere. It is true. It should also carry less weight than people give it.

This market is nine years old in its present form, totals ₹4,540 crore, and much of it was issued in the last eighteen months. Nothing has been outstanding for very long. SEBI's rules bar any city that has defaulted in the past year and require a surplus, so the market is made up, by design, only of India's strongest cities. And about 90% of it is held by banks and institutions who would have every reason to quietly extend a deadline rather than declare a default in public.

The clean record proves the plumbing works. It has never been tested by a city in real trouble.

What we still cannot tell you

We were able to settle most questions from primary documents. These are the ones we could not.

• No green bond impact report. For a bond sold on its environmental merits, there is no published report on emissions avoided or energy generated, verified by anyone independent. The claimed 86,000 carbon credits have no registry or methodology attached.
• The electricity arrangement is not public. Exactly how the power is credited from Khargone to the Jalud pumps, and what the state charges for carrying it, determines whether the savings hold up. None of it has been published.
• Only one month of savings data. The ₹3.64 crore figure is March 2026, the sunniest month of the year, reported by one trade publication. Monsoon months will be much weaker. There is no audited annual figure yet.
• The FY26 audited accounts, not due yet but worth watching given the filing record below.
• No independent audit of the bond proceeds by the CAG or the state. We want to be clear: we also did not find one clearing Indore. This is unexamined, not cleared.
• The performance test result. The builder had to prove the plant hits 75% efficiency over 30 days. That test should have run between March and June 2026. The result has not been published, and it is the single most informative missing document about whether this plant performs as promised.
• No meter readings. Every "80 lakh units a month" figure you will read traces back to the builder's contractual promise, not to an actual meter. Nobody has published what the plant has really generated.
• Why the first two tenders failed, and the exact date the contract was finally awarded. Both would come from the state tender portal and neither is public.

The paperwork record, fairly stated

Indore's filing record is easy to caricature, so it is worth going through the whole history with the exchange rather than picking the worst example.

Its accounts do arrive late. But the lateness is shrinking every year, which is the opposite of a deteriorating borrower.

On the other side of the ledger, the routine investor-protection filings have been consistently on time throughout. Record date notices go out weeks ahead of every payment. Escrow balances are certified quarterly. Investor grievance statements are filed half-yearly, every half-year, always reporting nil grievances.

So the fair summary is this: Indore is reliably good at the filings that protect bondholders and reliably slow at the ones that inform them. That is a real weakness, and the Brickwork situation shows it can have consequences. But it is a narrower charge than "this issuer does not file".