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MTNL bails out Krishna Valley bond issue

Ram Kumar, Freny Patel & Rennie Abraham

Mahanagar Telephone Nigam Ltd came to the rescue of the cash-strapped Maharashtra Krishna Valley Development Corporation's by investing Rs 2.50 billion in its Rs 4-billion bonds issue.

A single application for Rs 2.50 billion made by the public sector telecom major bailed out the state government corporation, whose secured non-convertible debenture issue has been open for subscription since November 2001.

The funds invested by MTNL are said to be from the corporate fund, while some market dealers stated that it is being invested from the Rs 3-billion gratuity fund of employees.

The Rs 4-billion issue had mopped up Rs 1.60 billion till May 7 from various nationalised banks and Maharashtra-based co-operative banks in the last six months that it was open.

The issue had come under a cloud as contractors to the MKVDC were hawking the bonds as a quid pro quo for recovering their dues amounting to Rs 20 billion from the state government undertaking.

In May last year, MKVDC raised Rs 3 billion at an interest rate of 12 to 12.5 per cent to service old debts and pay off the contractors. The latest 10-year NCD issue is being offered at 11.5 per cent.

When contacted the MKVDC executive director Vadnere only said that the 10-year bonds issue, which carries a coupon rate of 11.50 per cent and has no call and put option, would be closed soon.

According to sources in the know of developments, the entire brass of the Corporation was in New Delhi last week to get potential investors, mainly the government of India undertakings, to subscribe to the issue.

Meanwhile, the MKVDC has cleared interest payments amounting to about Rs 74 on its bonds to various institutional investors. There was a delay of almost one month in paying the interest due.

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