The once cash-rich Greater Mohali Area Development Authority (GMADA) has hired a Gujarat-based merchant banker to raise Rs 15,000 crore, which will be used not only for acquiring 5,000 acres of land but also depositing the funds thus raised with the Department of Finance.Once the money is raised, the merchant banker, Tipsons Consultancy Services Private Limited, will be paid an arranger fee of Rs 191.16 crore, an amount that is unprecedented in Punjab’s history. The money will be raised through bonds and bank loans, depending on whichever option is the cheapest.The proposal was approved following discussions at the development authority’s executive committee meeting held here this afternoon under the chairmanship of Punjab Chief Secretary and GMADA Chairperson KAP Sinha.When contacted by The Tribune, the Chief Secretary said the consultant was finalised through an open tendering process. “The merchant banker will get arranger fee only after Rs 15,000 crore has been raised. All necessary safeguards have been deployed,” he said.Documents available with The Tribune show that GMADA has already raised term loan and overdraft limit of Rs 7,653.23 crore from different banks till date and utilised Rs 6,241.82 crore at a weighted average interest rate of 7.14 per cent.Already facing a huge debt, the raising of additional Rs 15,000 crore could entail an annual interest burden of around Rs 1,000 crore to Rs 1,200 crore over the next 10 to 20 years. The money being raised now is to be used to acquire 5,000-6,000 acres of land for GMADA’s Aerotropolis project, Eco City 3 and Sectors 87, 101 and 103. The money will also have to be deposited with the Finance Department under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (RFCTLARR) Act, 2013.In the meeting today, it was highlighted that GMADA could raise the funds through debentures or bonds, as per the provisions of the Punjab Regional and Town Planning and Development Act, 1995.It is learnt that the file for raising the money through bond option was initially sent to the Finance Department. The department recommended that GMADA opt for the cheapest borrowing option after exploring all available funding sources. Subsequently, the issue was discussed and approved at a previous GMADA meeting. It was then decided to invite “expression of interest” for raising funds through alternative sources.The “request for proposal” for the loan was floated on June 25, following which six firms–Tipsons Consultancy Services, Tauras Corporate Advisory Services, PRP Professional Edge Associates, Real Growth Securities, AK Capital Services and Trust Investment Advisors–sent pre-bid queries. But only Tipsons and Trust Investment reportedly submitted the bids. The technical presentation of the bids was conducted on August 12 and financial bids were opened on August 13. While Trust Investment’s offer was Rs 259.50 crore, Tipsons was successful as it placed a lower bid of Rs 191.16 crore.Sources in the Finance Department said the state government was unlikely to provide guarantee for the bond. Sources in GMADA said the merchant banker would devise the fundraising strategy, liaise with investors, obtain credit ratings, secure approvals and list the bonds. The funds must be mobilised within nine months of signing the contract, with Rs 5,000 crore raised in the first three months after receiving an investment-grade rating, another Rs 5,000 crore in the next three months and the balance within the stipulated period.The state Finance Department has already recovered over Rs 10,000 crore from GMADA and other authorities under the RFCTLARR Act. Citing Section 10(3) of the Act, the state maintains that development authorities must either develop equivalent cultivable land or deposit an amount equivalent to the value of acquired land.Responding to a query by The Tribune, the government said it was not a loan. In a statement, it said, “We are raising infrastructure development bond, which provides a long-term financing mechanism to meet capital requirements without depending entirely on annual budgetary allocations. Such bonds allow infrastructure to be created ahead of development, thereby facilitating planned urbanisation and unlocking the economic value of land.”The government said the proposed Rs 15,000 crore bond programme would help GMADA mobilise long-term funds for large infrastructure projects; accelerate development of new residential, commercial and industrial areas; reduce dependence on immediate state budgetary support; match long-term financing with life and benefits of infrastructure assets; and create value and generate future revenue through development charges, land monetisation, betterment charges and other project-linked receipts.“Infrastructure bonds are an established and appropriate instrument for financing large-scale urban infrastructure, accelerating planned development and supporting long-term economic growth, subject to prudent borrowing and debt-servicing arrangements. Appointing an investment banker on a purely success-fee basis ensures alignment with successful fund mobilisation while minimising GMADA’s upfront financial burden. It also promotes efficiency, competitive pricing, wider investor outreach and greater accountability,” the statement read.