Lic, Mtnl Reluctant To Subscribe To Next Bond Series Of Mkvdc

The Life Insurance Corporation of India (LIC) and the Mahanagar Telephone Nigam Ltd (MTNL) are reluctant to subscribe to Maharashtra Krishna Valley Development Corporation's (MKVDC) proposed Rs 253-crore 11th bond series.

This follows MKVDC's inability in recent times to service its past bond issues, both in terms of interest and principal payments.

Of the proposed Rs 253-crore bond issue, MKVDC has been issued sanctions by the Maharashtra government to raise Rs 140-crore from the market backed by state government guarantee. Its proposal for the balance amount is pending with the state finance department. A decision is expected in the next fortnight.

MTNL had bailed out MKVDC in its last Rs 429-crore bond issue that closed in May this year with a single application of Rs 250 crore. However, the recent downgrades for MKVDC's bonds has resulted in institutions being disinclined to go for this state government paper.

"In recent months, our delay in servicing bonds has been a bone of contention with financial institutions, which otherwise have been regularly subscribing to our various issues," said a senior MKVDC official.

Interest payment to the tune of Rs 74 crore owed to financial institutions on March 31, 2002 was paid only on April 24. Even after this, delays continue to occur ranging from one to four days, which constitute a default in payment of interest.