The government announced in September that MTNL and BSNL had each received the sovereign guarantee to raise 109.10 billion rupees and 84.46 billion rupees, respectively, in the current fiscal year. Participants in the Indian corporate bond market should expect a heavy supply of bonds backed by the government in the coming weeks as state-run telecom giants MTNL and BSNL aim to raise $2.34 billion, according to three merchant bankers.

According to the bankers, Mahanagar Telephone Nigam Ltd. and Bharat Sanchar Nigam Ltd. want to issue government-guaranteed bonds to generate a combined 193.56 billion Indian rupees.

In November, MTNL intends to raise 109.10 billion rupees. The company will meet with bankers and investors on Tuesday in preparation for next week's bid solicitation.

The telecom company plans to sell bonds with a 10-year maturity and a coupon that is paid every two years, much like central government bonds. The government announced in September that MTNL and BSNL had each acquired the sovereign guarantee to fund 109.10 billion rupees and 84.46 billion rupees, respectively, in the current fiscal year.

The spread over national bonds may expand this time even with the guarantee. The market isn't very favourable this time, so the companies might have to pay a higher interest, one of the bankers said, adding that the corporations are being advised to spread out the borrowing.

In August, MTNL announced that it intended to sell 175.770 billion rupees worth of sovereign guarantee bonds and utilise the proceeds to pay down existing bonds and bank debts. As state-run telecom giants MTNL and BSNL intend to raise Rs 19,350 crore over the next two weeks, market participants for corporate bonds are preparing for a significant influx of government-guaranteed bonds, according to three merchant bankers.

The market isn't very favourable this time, so the companies might have to pay a higher interest, one of the bankers said, adding that the corporations are being advised to spread out the borrowing.

In August, MTNL announced plans to issue sovereign guarantee bonds for Rs 17,577 crore, with the proceeds going toward paying down existing bonds and bank debts.

The last time MTNL used the bond market was in October to December 2020, when it issued two 10-year government-guaranteed bonds with semi-annual coupon rates of 6.85% and 7.05% to raise a total of about Rs 6,500 crore. At the same time, bankers predicted that BSNL would issue a 10-year bond at the end of November or the beginning of December.