Top government officials told The Financial Express that MTNL's GDR would not be sold at a discount. "We will not sell unless our expectation is met," they said.

The officials added that the market outlook was expected to improve in the next couple of months. "MTNL third-quarter results alone are expected to wipe out the first-half drop in income and this will provide a cushion to the GDR," he added.

MTNL had for the first time recorded a 4.6 per cent drop in income in the first six months ended September 1999.

Meanwhile, the MTNL board has also amended its articles of association to allow the company to diversify and extend activities, services to other parts of the country and overseas. The articles of association were amended at anextraordinary general meeting.

The amendment would also allow the company to buy back its shares to enhance shareholder's value without the prior approval of the President of India.The amendments will allow the company to face competition effectively and give the MTNL board the flexibility in fixation and modification of tariff. In addition, the board of directors will also be able to take decisions on entering into joint ventures and strategic alliances.

The GDR issue, which was earlier to be wrapped up around November 20, 1999, has been delayed and is likely to take place in the first quarter of 2000.MTNL had to defer the issue following advice from merchant bankers who opined that in view of the less-than-ideal sentiment prevailing in the GDR market, the issue should be postponed with a view to getting a better price later.

The MTNL GDR is currently quoting at $8.30-8.60, as compared to the 1997 issue price of $11.95 per GDR. At the prevailing prices, the government would have mopped up $76-80million through disinvestment. Further, most investors are closing their books early ahead of the millennium bug. This could depress the market since bankers may not be keen to make fresh investments this close to the threat period.

Since MTNL is a well-known scrip overseas, it is expected to be fairly easy to wrap up the issue quickly in the last quarter of 1999-2000. This is the second float proposed by MTNL, which had earlier divested government shares through a GDR issue in 1997.

MTNL has already obtained approval of the Foreign Investment Promotion Board (FIPB) for divesting up to 19 million shares, which would reduce the government stake in the company from 56.25 per cent to little over 51 per cent. Goldman Sachs, HSBC Investment Banking and Merrill Lynch have been appointed as joint global coordinators to the issue.