BSNL preparing to raise Rs 8,500 crore via local bonds, fund to be used to repay debt

State-owned telecom service provider BSNL is planning to raise upto Rs 8,500 crore by tapping the local bond market for the first time.

As per news source, BSNL’s proposed bonds will be sovereign-guaranteed paper with up to 10-year maturities. The company will use the proceeds to repay debt and also use it for expansion as it aims to regain market share in a sector.

“We are planning to issue the bonds by September, depending on market conditions,” Chairman Pravin Kumar Purwar told an online daily, confirming the matter. “BSNL will use the money to repay some older debt and fund capital expenditure.”

BSNL has a total debt of about Rs 23,000 crore. Final decisions on the quantum of debt repayments and lenders will be taken at a later stage. The bonds will likely come up for auction on the stock exchanges, known as electronic bidding platforms in market parlance.

The company is in talks with local rating companies to obtain credit ratings. With the bonds guaranteed by the government, the grade is likely to be triple-A with structured obligation, which signifies additional sovereign support.

As per the dealers, the rate of interest is expected to be about 7%.

ICICI Bank, I-Sec Primary Dealer, PNB, JM Financial, Trust Capital and SBI Cap are some of the organizations that will help in the company's maiden bond sale.

“The bond sale should evince good investor demand as risk-averse investors are looking for safety of investment rather than any higher yield,” said a local arranger involved in the exercise.

Long-term investors including the Employees’ Provident Fund Organisation, Life Insurance Corporation of India and private insurers and mutual funds are expected to buy the debt securities amid surplus market liquidity. The banking system has a cash surplus of Rs 3.05 lakh crore.