3:12 pm - Monday November 9, 2015

MTNL planning to raise around Rs 2,300 crore by selling bonds with ten-year maturity

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MTNL gains on buzz Cabinet OKs spectrum refund
MTNL gains on buzz Cabinet OKs spectrum refund

MUMBAI: State-owned Mahanagar Telephone Nigam is planning to raise around Rs 2,300 crore by selling bonds with ten-year maturity. A week ago, it had mobilised Rs 1,500 crore by offering the same securities.

“We have got approval for Rs 3,769 crore collectively this year, and are raising it in two tranches as we did not collect the full amount in the first issue,” a senior company official told ET, confirming the second tranche of fund raising.

The bonds will open for bidding on Wednesday as the coupon rate is expected to be fixed above 10-15 basis points higher than the benchmark government bonds.

The fixed spread finalised in the bidding process will be added to the average of two weeks’ benchmark sovereign bonds estimated at 8.19%,” said an investment banker familiar with the matter, but didn’t wish to be named.

This means, the annualised yield could be at 8.50-8.51% compared with 8.41% in the earlier issue. MTNLBSE 1.09 % securities are rated triple-A (Structured Obligation) by rating companies Crisil and Care.

Structured Obligation signifies the government guarantee, which can be invoked when the issuer defaults in interest repayments.

“The spread between the sovereign and government-guaranteed corporate bonds has contracted significantly to 10-20 bps from about 60 bps last year. This has helped issuers in terms of cost of borrowings,” said Ajay Manglunia, head -fixed income, Edelweiss Securities.

“FIIs, which almost exhausted their investment limit in the G-Secs, are now investing in these securities.”

Last week, FCI bonds slipped two bps below the similar government bonds on higher demand from overseas investors but later corrected a bit. Bond yields and prices move in opposite direction.

MTNL, Food Corporation of India and Air India are three bond issuers who are in the same league, with all of them enjoying a sovereign guarantee status.

Despite not being in the best of financial health, overseas investors rush to lap up these securities as they treat them as quasi-government securities.

Earlier, big investors like HSBC, JPMorgan were seen investing in such issues.

 

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