Indian corporate bond market participants are braced for a heavy supply of government guaranteed bonds over the next few weeks as state-run telecom giants MTNL and BSNL aim to raise USD 2.34 billion, three merchant bankers said.

Mahanagar Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL) intend to raise an aggregate of 193.56 billion Indian rupees through government guaranteed bonds, the banker said.

It is set to seek bids next week and will meet the bankers and investors on Tuesday, according to the bankers. The telecom company is looking to issue bonds maturing in 10 years and will pay a semi-annual coupon, similar to how central government bonds are priced.

MTNL and BSNL both received the sovereign guarantee to raise Rs. 109.10 billion and Rs. 84.46 billion, respectively, in the current fiscal year, the government said in September. Despite the guarantee, the spread over sovereign bonds may widen this time.

“The companies may have to pay a higher yield this time as the market is not that favourable,” said one of the bankers, adding that the companies are being advised to spread out the borrowing.

MTNL said in August that it plans to issue sovereign guarantee bonds worth Rs. 175.770 billion and would use the proceeds to service older bonds and bank loans. The last time MTNL tapped the bond market was in October to December 2020, when it raised an aggregate of around Rs. 65 billion through two 10-year government guarantee bond issuances at a semi-annual coupon of 6.85 percent and 7.05 percent.

Meanwhile, BSNL may also launch a 10 year bond issue at the end of November or in early December, bankers said. The company has raised Rs. 85 billion through 10-year bonds at a semi-annual coupon of 6.79 percent in September 2020.

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