MTNL stock soars 19% as govt deposits Rs 92 cr to pay bond interest dues

In past four trading days, the stock has zoomed 50% on reports that the government was considering the option of handing over operations of telecom company to Bharat Sanchar Nigam Limited (BSNL).

Shares of Mahanagar Telephone Nigam Limited (MTNL) hit a multi-year high at Rs 63.32, as they zoomed 19 per cent amid heavy volumes on the BSE in Thursday’s intra-day trade after the government deposited Rs 92 crore to clear immediate bond interest dues of the state-owned telecom service provider.

On July 11, 2024, MTNL disclosed to the exchanges that it could not fund the escrow account for the payment of semi-annual interest on the series VIII-A bonds, as per the structured payment mechanism for the bonds, due to insufficient funds.

The payment of semi-annual interest on series VIII-A bonds is due on 20 July 2024 and as per the structured payment mechanism, the designated trust and retention account is to be funded by MTNL, 10 calendar days i.e. (T-10)th prior to the due date, to the tune of the interest and/or principal obligations on the bonds.

Meanwhile, on Wednesday, July 17, informed that the funding of designated ESCROW account for payment of 2nd Semi Annual Interest w.r.t. 7.59 per cent MTNL Bond Series VIII-A (INE 153A08154) which is due on 20th July 2024 has been done on 17.07.2024. CLICK HERE FOR STATEMENT

At 10:42 am; MTNL was trading 17 per cent higher at Rs 62.40, as compared to 0.12 per cent rise in the BSE Sensex. The average trading volumes at the counter more than doubled with a combined 102 million shares changing hands on the NSE and BSE.

Currently, the stock of telecom - cellular & fixed line services provider quotes at its highest level since November 2010. In the past four trading days, the stock has zoomed 50 per cent. The buying at the counter was attributed to reports that the government was considering the option of handing over operations of telecom company to Bharat Sanchar Nigam Limited (BSNL). A final call on this is likely to be taken in a month’s time.

However, MTNL on Tuesday, July 16, after market hours clarified that there is no such circulated information for the general consumption/information of MTNL except that deliberations through Committee of Secretaries meetings are being held at highest level of Department of Telecommunications (DoT) and other Govt. Ministries for various options on way forward in case of MTNL and for further action for formal approvals of Government thereto.

Therefore, no such specific decision or information is available at this point of time. As such there is no such circulated / written information that can be disclosed under Regulation 30 of the SEBI (LODR) Regulations, 2015 with MTNL, the company said. 

MTNL, a public sector enterprise, is engaged in providing telecom services in the geographical area of Mumbai and Delhi. MTNL is one of the two state-owned telecom service providers in India, alongside BSNL. The Government of India (GoI) holds majority stake in MTNL (56.25 per cent as on March 31, 2024), and the balance is held by the public.

MTNL enjoys a ‘Navratna Status’ that gives greater autonomy to central public sector enterprises (CPSEs) in their investment and capital expenditure (capex) decisions. Such a status also aims at facilitating expansion of its operations, in domestic and global markets.

In October 2019, keeping in mind the legacy and the strategic importance of MTNL, the GoI announced revival plan for MTNL and BSNL and continued to support the company’s funding requirements through issuance of the LoC. To make the public sector units (PSUs) financially viable, the Union Cabinet approved the second revival plan for BSNL and MTNL (the telcos) amounting to Rs 1.64 trillion on July 27, 2022. The revival plan is aimed at upgrading services, rolling out 4G services, augmenting the telecom network, and de-stressing balance sheets.

As BSNL is handling MTNL’s operations, fund infusion per revival package has taken place in BSNL, which is managing combined capex for the telcos. The progress on the monetisation of certain identified land assets of MTNL has also been slow, which has since been transferred from the Department of Investment and Public Asset Management (DIPAM) to the Department of Public Enterprise (DPE), according to CARE Ratings.