(Bloomberg) -- The Indian government will deposit about 941 million rupees ($11.3 million) in an escrow account to ensure timely interest payment on state-owned Mahanagar Telephone Nigam Ltd.’s local-currency bond, according to people familiar with the matter.
The move follows the telecom operator’s statement last week that it didn’t have sufficient funds to transfer an adequate amount of interest on its 7.59% July 2033 bond, which is guaranteed by the government.
The payment, which is due on July 20, needs to be deposited in the escrow account no later than Wednesday, according to the bond terms. The money could be deposited as early as Tuesday, one of the people said.
The planned deposit underscores state-owned telecom companies’ struggles in competing with their private-sector counterparts, as well the government’s determination to avoid any non-repayment at a time when the country’s bond business is receiving global investors’ attention.
The government will never default on an obligation and will explore options for payments on the bonds coming due in the future, according to the people, who asked not to be named. MTNL has 48.1 billion rupees of local-currency bonds to service for the rest of 2024, according to data compiled by Bloomberg.
A finance ministry spokesperson didn’t respond to a request for a comment.
With its subscriber base dwindling, MTNL reported a loss of 32.7 billion rupees in the year ended March 2024, compared to 29.2 billion rupees of loss in the previous year.
India’s telecom industry has boomed in recent years, but state players, including MTNL, have faced heightened competition from private peers.
Meanwhile, MTNL’s shares have gained in eight out of 12 trading sessions this month, with the current price on Tuesday at its highest in more than a decade. The operator last tapped the local-currency bond market in March, raising 5.6 billion rupees through notes due in a decade at a semi-annualized coupon of 7.51%.
--With assistance from Santosh Kumar and Siddhartha Singh.
©2024 Bloomberg L.P.
