MUMBAI, June 2 -- Vadodara Municipal Corporation (VMC) is preparing to tap retail investors with what is expected to be India's first blue bond and the country's first public issue of blue municipal bonds, seeking to raise up to Rs.200 crore by July-August, according to four people aware of the matter.

The Gujarat civic body is planning a five- to seven-year bond, with proceeds earmarked for water-management projects.

"The proceeds from the proposed blue bond issue will be utilized for water management projects," Santosh Tiwari, chief financial officer of Vadodara Municipal Corporation, said, confirming plans for the issuance.

Blue bonds are a subset of green bonds, with proceeds dedicated to water-related projects such as water supply...