Informist, Monday, Jul 17, 2023
–Sources: MTNL plans up to 25-bln-rupee, govt-guaranteed bond issue
–Sources: MTNL may seek bids for 10-yr govt-backed bonds this week
–Sources: MTNL may raise funds via bonds in multiple tranches FY24
By Subhana Shaikh
MUMBAI – Mahanagar Telephone Nigam Ltd plans to raise up to 25 bln rupees this week through government-guaranteed bonds maturing in 10 years, several sources in the know told Informist.
Last week, the public sector telecom company had secured an in-principle approval from the BSE for its government-guaranteed, unsecured, rated, listed bonds aggregating up to 66.61 bln rupees in 2023-24 (Apr-Mar).
The issue is likely to have a base size of 5 bln rupees and a greenshoe option of 20 bln rupees, sources said.
Bidding will take place on the BSE’s electronic bidding platform on Wednesday. The bonds, rated AAA by India Ratings and Research, will get allotted on Thursday, sources said.
“Yes, they have plans to map the issue either today or tomorrow (Tuesday). They might not borrow the entire 66.61-bln-rupee amount at once, but target the market with multiple tranches,” a senior treasury official at a private sector bank said.
The last time the debt-ridden company had tapped the bond market was in March, when it raised 634 mln rupees through 10-year government-guaranteed bonds at a semi-annual coupon of 7.75%. This was the company’s fifth tranche of the total 109 bln rupees it raised in 2022-23.
According to merchant bankers, the semi-annual coupon on the telecom player’s bonds is expected in the range of 7.72-7.85%. Demand is expected from provident funds and pension funds, however, the company is trying to loop in investors such as insurance companies.
“As far as credit is concerned, everyone is aware that MTNL is not so good and there are many problems with the company. Buyers are only looking at the government guarantee and that’s the only reason why investors have been buying it,” another treasury official said.
In the secondary market of corporate bonds, MTNL’s papers are quoted at a weighted average yield of 7.78-7.85%.
“The rating reflects the absolute, unconditional and irrevocable pre-default guarantee extended by the government of India for the timely repayment of principal and interest on the rated NCDs,” India Ratings and Research said in a release last week.
The rating agency believes MTNL’s liquidity for its bonds is supported by the trustee-monitored pre-default payment mechanism. According to the tri-patriate guarantee agreement, the liability of bond constitutes a direct and general obligation of the government.
Historically, MTNL’s cash flows have not been adequate to support its debt servicing. On a consolidated basis, the company had moderate cash levels of 3.2 bln rupees as on Mar 31 and the average utilisation of the fund-based bank lines was around 80% for the nine months ended Jun 30.
The company’s debt service coverage ratios remain weak owing to continued operating losses over the last few years, with its gross debt increasing to 283.5 bln rupees at the end of 2022-23 as compared with 197.4 bln rupees as at 2018-19.
At 1410 IST, shares of MTNL were up 0.5% at 19.40 rupees on the National Stock Exchange. End
Edited by Vandana Hingorani
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