MTNL may redial bond mkt by Oct-end as debt sale today falls short

NEW DELHI/MUMBAI – After its first bond sale in six years failed to garner the desired amount of funds, state-owned telecom major Mahanagar Telephone Nigam Ltd is likely to try its luck again by the end of the month, according to sources privy to the matter.

MTNL had invited bids for 10-year government-guaranteed bonds worth 65 bln rupees today, but was able to raise only 43.16 bln rupees at a semi-annual coupon of 7.05%. It is likely to tap the market later this month to raise the balance 21.84 bln rupees, merchant bankers said.  

“MTNL today received total bids over 117 bln rupees, but it wasn’t comfortable with the pricing level. The company will come again for the balance amount,” one of the arrangers told Cogencis. 

Had the company accepted bids for the entire 65 bln rupees worth of bonds, it would have had to shell out a semi-annual coupon of 7.18%, merchant bankers said. This is around 45 basis points higher than the prevailing yield on the 10-year bond issued by NABARD, regarded as the benchmark.

MTNL’s bond has been rated at the highest notch of ‘AAA’ by CRISIL.  

The telecom major had last tapped the bond market in 2014, when it raised 15 bln rupees by issuing bonds maturing in 10 years.

Bharat Sanchar Nigam Ltd was the first company to issue government-backed papers in the current financial year. It had raised 85 bln rupees through its maiden bond sale, issuing a 10-year paper with a semi-annual coupon of 6.79%.

The other government-guaranteed bond offering in the pipeline is from Food Corp of India. On Sep 22, Cogencis exclusively reported that FCI is likely to raise 80 bln rupees through issue of similar government-guaranteed bonds maturing in 10 years by mid-October. 

According to bankers, MTNL is likely to tap the market again only after FCI’s bond issue. 

Shares of MTNL today closed flat at 8.25 rupees on the National Stock Exchange.