Oversubscribed Amaravati Bonds scare people

The State government had issued Amaravati Bonds 2018 to raise funds from investors for the new capital city – Amaravati. The government wanted Rs 1300 crore but in just one hour of its release in the Bombay Stock Exchange, the bonds were oversubscribed by 1.53 times and pooled Rs 2000 crore investment.

The ruling Telugu Desam Party and its pro-investors might claim it the popularity of Chief Minister Chandrababu Naidu or the confidence of the people (investors) in the leadership of Chandrababu Naidu. But, the over subscription poses several questions related to raise several issues concerning the future of the State.

The State government had offered a whopping 10.32 per cent interest, which is highest rate of interest paid to the investors by any government or the bank. This 10.32 per cent is paid for first five years. As the State government stands guarantee for the investment and the payment of interest and the principal amount, the investors will obviously prefer it.

There is another angle – or a suspected angle for this over subscription. Chandrababu Naidu is a known promoter of such acts and he has a strong investor base within his party and his community. They are determined to bring the TDP back to power in the next elections. Besides the election investment, it looks like the pro-TDP and pro-Chandrababu Naidu investors have done their best to give a positive image for Chandrababu Naidu by oversubscribing the Amaravati Bonds in just one hour.

There is another question to this over subscription of the bonds in just one hour. This raises the doubt whether the so called investors have advance information about the bonds so that they could subscribe them in the first hour itself. The bonds subscription too appeared something like the lands purchase in Amaravati by the TDP leaders. It was then called an inside trading when the lands in Amaravati were purchased by the TDP leaders and investors, who had information on the location of the capital. In the same way, the bonds subscription too had some doubts as the benefits or returns from the bonds are equally high.

This is not a healthy sign for the State which is running on the external borrowings as it has revenue deficit and whopping debt. The burden would be more on the State as the payment to the investors at 10.32 per cent rate of interest is too high.

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