In a move to strengthen its financial position, state-run telecom major BSNL is looking to raise around 24 billion Indian rupees through issuance of two separate 10-year bonds carrying sovereign guarantee. According to leading investment bankers, the telecom firm has invited initial bids from commercial banks and investors on Tuesday for the proposed bond sale.
Through this fundraise, BSNL aims to collect close to 8 billion rupees, with the remainder being an oversubscription option. Significantly, both bond issues will have the backing of unconditional and irrevocable guarantees from the Indian government. This ensures very high credit ratings of AAA(CE) from top domestic rating agency CRISIL.
An attractive element for investors is that the 10-year bonds will have a call option after 8 years. This gives BSNL flexibility to pre-pay the debts earlier if it wants. Theissuance is a critical step for the debt-laden telecom operator to enhance its financial resources. It will aim to utilize funds for both network expansion and improving customer services in highly competitive telecom market.
With strong credit support from the center, BSNL is hoped to receive good interests from banks and investment entities. If successful, the bond sale will shore up its balance sheet and ability to invest in 4G infrastructure rollout. Only time will tell if this sovereign guarantee-backed bond issuance helps revive the fortunes of the largest public sector telecom company.
