| Bharat Sanchar Nigam Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA (CE) /Stable' rating on the Rs 8,446 crore and Rs 8,500 crore bonds of Bharat Sanchar Nigam Limited (BSNL).
The rating reflects the strength of the credit enhancement provided by the unconditional and irrevocable guarantee from the Government of India (GoI) through the Department of Telecommunications, Ministry of Communications, and the trustee-administered payment mechanism.
CRISIL Ratings believes the guarantee from the GoI for the bonds of BSNL, along with the structured payment mechanism, ensure that all debt obligations are met on time. |
Analytical Approach The rating is fully driven by the unconditional and irrevocable guarantee provided by the GoI and the trustee administered payment mechanism. The rating also factors in full ownership of BSNL by the government.
CRISIL Ratings has combined the business and financial risk profiles of BSNL and its subsidiary. The entities operate under a common management and have strong business and financial linkages.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description
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Liquidity: Superior The rated bonds derive comfort from liquidity based on the guarantee structure (unconditional and irrevocable guarantee from the central government through the Department of Telecommunications, Ministry of Communications), which should ensure timely repayment of debt. |
Outlook: Stable The outlook on the rated bonds reflects the credit quality of the GoI, the guarantor to the rated debt. |
Rating Sensitivity factors Downward factors
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Adequacy of credit enhancement structure The GoI has provided a comprehensive, unconditional and irrevocable guarantee for the rated bonds issued by BSNL. The guarantee shall not be transferrable to any agency without the prior approval of the Ministry of Finance (Budget Division). The well-defined T-structure should ensure timely payment of interest and principal obligations. |
Unsupported ratings ‘CRISIL BBB’ CRISIL Ratings has introduced the 'CE' suffix for instruments having an explicit credit enhancement feature, in compliance with the Securitites and Exchange Board of India (SEBI) circular dated June 13, 2019. |
Key drivers for unsupported ratings For arriving at the unsupported rating, CRISIL Ratings has combined the business and financial risk profiles of BSNL and its subsidiary (refer to Annexure) as they are in related businesses and have common promoters. Furthermore, CRISIL Ratings has notched up the standalone ratings to factor in the government support to BSNL.
The reaffirmation of the unsupported ratings factors in the 100% ownership of BSNL by the GoI. Also, the GoI, through Administrative Ministry, appoints all the board of directors and key management personnel of BSNL. The GoI has provided consistent support in the past through revival packages announced on October 23, 2019; July 27, 2022; and June 7, 2023. The support from the GoI to BSNL will continue.
BSNL plays a crucial role in expansion of telecom services in rural areas, development of indigenous technology and disaster relief. The GoI banks heavily on BSNL in providing uneconomic but socially desirable services. Significant projects such as the Network for Spectrum (NFS), Bharat Net, Smart Cities, are awarded to BSNL because of its vast resources and expertise in managing the country-wide network. Accordingly, the government has been providing a package of financial and non-financial measures to ensure the viability of BSNL is not impaired.
On October 23, 2019, the GoI announced the first revival package for BSNL, providing support in the form of Voluntary Retirement Scheme (VRS), 4G spectrum allocation and raising of sovereign guaranteed bonds. The second revival package was announced on July 27, 2022, aggregating Rs 1.64 lakh crore, wherein BSNL has received 4G spectrum allocation for rolling out 4G services, Rs 3,013 crore from the Department of Telecommunications for capital expenditure (capex) and Viability Gap Fund of Rs 13,789 crore. Additionally, BSNL has been able to settle its pending adjusted gross revenue (AGR) obligations by converting the same into equity and raising sovereign guaranteed bonds aggregating Rs 12,684 crore. The GoI announced the third revival package on June 7, 2023, reserving around 910 MHz spectrum in the 4G and 5G bands aggregating ₹89,047 crore, which will be utilised by BSNL for rolling out these services in the future.
The government support demonstrated through these revival plans has led to improvement in the operating performance of BSNL. Revenue rose 14% on-year to Rs 19,115 crore in fiscal 2023, leading to operating profit of Rs 192 crore in fiscal 2023 against operating loss of Rs 1,004 crore in fiscal 2022.
The financial risk profile remains weak due to accumulated losses and sizeable debt. BSNL has approval from the Union Cabinet for raising sovereign guaranteed bonds aggregating Rs 18,643 crore, which will be utilised for debt repayment (existing as well as that may be raised in future). |
About the Company BSNL was incorporated in 2000. It took over the business of providing telecom services and network management from the central government’s erstwhile Department of Telecom Services (DTS) and Department of Telecom Operations (DTO) with effect from October 1, 2000, on a going concern basis. It is one of the largest public sector units providing a comprehensive range of telecom services in India. It is fully owned by the government. BSNL has installed Quality Telecom Network in the country and is now focusing on improving and expanding the network and introducing new telecom services with information and communications technology (ICT) applications in villages. |
Key Financial Indicators
These are CRISIL Ratings adjusted numbers and may not match the numbers reported by the company. |
List of covenants The material covenants of the bonds of Rs 8,500 crore and Rs 8,446 crore are:
• The government will only cover the principal amount and the normal interest. • The guarantees will not be transferrable to any agency without the prior approval of the Budget Division, Department of Economic Affairs, Ministry of Finance. In case of default, the lending agency shall invoke the guarantee within a time limit not exceeding 60 days from the default. If the guarantee is not invoked within the stipulated period, the guarantee will cease to exist for the portion of the tranche/loan/liability for which the guarantee has not been invoked. • The government guarantee shall reduce periodically equivalent to the repayment that ought to have been made by the borrower as per the terms and conditions of the loan agreement. This will be subject to the condition above. • The trustee-monitored payment mechanism for these bonds is listed below:
Payment structure for bonds amounting to Rs 8,500 crore and Rs 8,446 crore:
• NOTE: “T” refers to the due date for interest payment/principal repayment • If any coupon payment date falls on a day that is not a business day, the payment shall be made by the issuer on the following working day, in line with the SEBI circular No CIR/IMD/DF-1/122/2016 dated November 11, 2016. • If the redemption date (also being the last coupon payment date) of the bonds falls on a day that is not a business day, the redemption proceeds shall be paid by the issuer on the immediately preceding business day along with interest accrued on the bonds until, but excluding, the date of such payment. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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