| Strong Economic Base and Sustained Operating Performance
With its ability to attract investments across a wide range of industries, Indore has established itself as the commercial capital of Madhya Pradesh. The city has a well-diversified industrial base comprising textiles, iron and steel, chemicals, pharmaceuticals, IT, solvent plants, and other sectors, along with a favourable ecosystem for agro-based trading, soya processing, and food processing units. Indore is also a prominent educational hub, with institutions such as the Indian Institute of Technology (IIT) and the Indian Institute of Management (IIM). The strong economic activity has supported employment generation and higher per capita income. Further, the city has been selected under key urban initiatives such as AMRUT 2.0 and the Smart Cities Mission, aimed at enhancing urban infrastructure and liveability. Reflecting the strong economic base, IMC has demonstrated sustained improvement in operating performance, with revenue increasing to Rs. 2,067.62 crore in FY2025 from Rs. 1,918.95 crore in FY2024, primarily driven by higher tax collections. The operating margin remained largely stable at around 34.43 per cent in FY2025 as against 35.51 per cent in FY2024, while the net margin moderated slightly to 13.17 per cent due to higher depreciation costs. Further, IMC reported revenue of Rs. 1,276.40 crore in H1 FY2026, indicating continued growth momentum.
Healthy Financial risk profile
The financial risk profile of IMC remains healthy marked by strong net worth, low gearing and healthy debt protection metrics. The net worth of IMC stood at Rs. 6533.42 crore as on March 31, 2025 increased from Rs. 6123.54 crore as on March 31, 2024. The gearing level of IMC stood low at 0.11 times as on 31 March, 2025 as against 0.11 times as on 31 March 2024, depicting a conservative leverage policy employed by the corporation. IMC has a total debt of Rs. 691.46 crore as on 31 March 2025 against Rs. 691.54 crore in the previous year. The interest coverage ratio (ICR) of the corporation moderated yet stood healthy at 15.02 times as against 21.41 percent in FY2024. The net cash accruals against the total debt stood healthy at 0.98 times in FY2025 against 0.95 times in FY2024. Further, total outside liabilities to total net worth stood steady and healthy at 0.20 times as on 31 March 2025 and 0.25 times as on 31 March 2024.
Presence of Structured & Waterfall Payment Mechanism
The payment mechanism for the term loans and NCDs issued by IMC entails the maintenance of an Escrow Account, Debt Service Reserve Account (DSRA), Interest Payment Account (IPA), and Sinking Fund Account (SFA). This structured framework offers credit comfort through timely servicing of obligations, supported by defined fund flows and dedicated reserves for interest and principal repayments, thereby strengthening IMC’s overall debt servicing capability.
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The DSRA for NCDs has been created on the pay-in date with an amount equivalent to one year’s interest payment. For term loans, IMC maintains a DSRA to cover one quarter’s principal and interest obligations.
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The owned revenues collected in the Escrow Account are transferred to the IPA and SFA on a monthly basis, in line with the terms of the bond.
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At the end of each month, an amount equivalent to 20 per cent of the half-yearly interest payment is transferred to the IPA.
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An amount equivalent to 1/12th of 10 per cent of the bond size is transferred to the SFA on a monthly basis
Debt Service Reserve Account (DSRA)
IMC maintains a Debt Service Reserve Account (DSRA) to ensure timely servicing of its debt obligations. The DSRA is maintained upfront to cover one quarter’s principal repayment and interest obligations. The reserve is to be utilised only in the event of a temporary shortfall in cash flows for debt servicing and is required to be replenished at the earliest upon availability of funds. The DSRA balance stood at Rs. 23.87 crore as on March 31, 2026.
Interest Payment Account (IPA)
An amount, as specified in the terms of the bond/loan agreements, will be transferred to the IPA from the Escrow Account on a monthly basis. In case of any shortfall in the amount lying to the credit of the Interest Payment Account on the transaction date (T), i.e., 25 days prior to the debt servicing date, the trustee shall inform IMC, and IMC shall make good the shortfall by T-15 days. If the corporation fails to cover the shortfall by T-14 days, the trustee will instruct the bank to transfer the deficit from the DSRA to the IPA by T-10 days. The interest shall be paid by IMC on the due date. Any amount drawn from the DSRA shall be replenished at the earliest.
Sinking Fund Account (SFA)
IMC maintains a Sinking Fund Account (SFA) on a monthly basis to provide for the principal instalments due on a quarterly basis. The funds accumulated in the SFA are earmarked exclusively for servicing the term loan and are not utilised for any other purpose. The balance in the SFA is utilised on the scheduled due dates for repayment of principal obligations.
No Lien Escrow Account
IMC has established an escrow mechanism wherein the escrow account is designated prior to loan disbursement. All inflows, including compensation in lieu of Octroi from the State Government and Central Government, are routed through this escrow account. Under the defined waterfall mechanism, debt servicing obligations of the term loan carry first priority charge. The funding of project-related expenditures are met through internal accruals. Further, surplus funds available in the No-lien escrow account, after maintaining the required balances in the interest payment account and the sinking fund account, are transferred to the general account.
Management of Funds
The management of funds across various designated accounts is overseen by the debenture trustee. Any surplus funds available in the Escrow Account, after meeting the requirements of the structured payment mechanism, may be transferred to IMC’s general fund account. The Escrow Account, DSRA, IPA, and SFA are maintained with scheduled commercial banks having a minimum rating of ‘AA+’ from two rating agencies throughout the tenure of the instruments. In case the rating of the bank falls below ‘AA+’, IMC shall shift the funds to another bank meeting the specified criteria. The status of these designated accounts is shared with the debenture trustee and rating agencies on a periodic basis during the tenure of the bonds. Further, funds lying in the IPA, SFA, and DSRA may be invested in fixed deposits with scheduled commercial banks having a minimum dual rating of ‘AA+’ or above. The interest income earned on such investments is utilised towards meeting obligations of the respective accounts.
Civic Service Coverage
IMC has achieved adequate coverage in key civic services, with water supply and sanitation services extending to a majority of the population base. The Corporation has also achieved 100 per cent coverage in solid waste collection since FY2020, reflecting strong operational effectiveness in waste management. The continued focus on infrastructure development under initiatives such as AMRUT 2.0 is expected to further enhance service coverage, particularly in water supply and sewerage systems, thereby improving overall urban service delivery.
Infrastructure Capex under AMRUT 2.0 Supporting Urban Development
Indore Municipal Corporation (IMC) is undertaking a significant capital expenditure programme under the Government of India’s AMRUT 2.0 scheme, primarily focused on strengthening urban water supply and sewerage infrastructure. The proposed investments are aimed at improving service coverage, operational efficiency, and the long-term sustainability of essential urban utilities. To fund the proposed capex, IMC plans to mobilize debt of approximately Rs. 1,530 crore, which has been incorporated in the financial projections in line with the implementation schedule. The AMRUT 2.0 capex is largely concentrated towards water supply augmentation and distribution strengthening as well as sewerage network expansion and treatment infrastructure. These investments are expected to enhance service delivery standards, improve collection efficiency, and support compliance with environmental and regulatory norms.
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| Significant buildup in receivables
The corporation’s receivables have increased over the years, resulting in a significant buildup as on March 31, 2025. The gross debtor position stood elevated at Rs. 2,728.36 crore as on March 31, 2025, as against Rs. 2,568.73 crore in the previous year. The debtors largely pertain to accumulated overdues in property taxes and fees & user charges. However, IMC has created a provision of Rs. 905.49 crore for a portion of these overdue receivables, which is expected to be maintained going forward. Accordingly, the net receivables stood at Rs. 1,822.86 crore as on March 31, 2025, as against Rs. 1,663.23 crore as on March 31, 2024. Further, in H1 FY2026, the net receivables stood at around Rs. 2,040.48 crore. The extent of recovery of legacy receivables remains uncertain in the near term. Acuité believes that any significant build-up in receivables beyond the current levels will be a key rating sensitivity factor.
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