State-run telecom operator Mahanagar Telephone Nigam Ltd (MTNL) is planning to raise about Rs 5,000 crore to Rs 7,000 crore by issuing sovereign bonds this fiscal year to reduce its debt burden.
“We have sought government approval for the sovereign bonds. The timing of the issue depends on the government approval. We will issue bonds within three months from the date of approval,” said A K Garg, chairman and managing director, MTNL.
The main purpose of these long-term bonds is debt reduction. MTNL, which is 56.25% owned by the government, has borrowed a little more than Rs 11,000 crore to pay for the spectrum of 3G and wireless broadband access (BWA). “For this loan, we pay about Rs 1,100 crore of interest annually. This has become a huge burden for the company,” he said.
MTNL had borrowed about Rs 6,500 crore to pay for 3G spectrum and an amount of Rs 4,533.97 crore for BWA spectrum.
The state-owned telco has already surrendered the BWA spectrum to the government seeking refund of the money paid for the airwave. “With the sovereign bonds, we will be able to clean up the debt. Eventually, the company would be able to save about Rs 1,100 crore which is being paid as bank interest now,” said Garg.
MTNL, which reported a loss of Rs 4,109 crore in fiscal year 2012, is hoping to turn cash positive with in the current fiscal year if all its endeavours get government support, pointed out Garg, adding that the company would be able to increase revenue by about 5-10% annually once it wipes out all its debt. But, reporting a net profit might take 3-4 years, he said. It hopes to close the current fiscal year with a revenue of about Rs 3,600 crore.
Besides, it is also in process of appointing an external consultant to finalise possible ways to monetise its land bank, primarily in Delhi and Mumbai. It about 230,000 sq.m. of technical land that can be used for commercial purpose and 380,000 sq.m. of residential land in Delhi and Mumbai. The state-owned firm would form project-specific partnerships with private companies for development and constructions on these lands. The developed properties would be rented out, but MTNL will continue to own the lands, he added. A consultant is expected to be appointed within a month.
Besides, the company is also planning to sell its unused flats and isolated constructed space that could fetch it close to Rs 300 crore. It also expects to earn about Rs 100 crore by renting out spaces at the existing buildings of the company.
The financial restructuring was planned as the company need to report profit to retain its Navratna tag that was given to the state-run telco in 1997. MTNL has already made presentations to the Department of Public Enterprises (DPE) detailing its plans on how it would improve the financial condition of the loss-making government-owned enterprise.
