MTNL Soars 19% on Government Bond Guarantee

18 Jul 2024 , 03:40 PM

Mahanagar Telephone Nigam Limited (MTNL) witnessed a significant 19% surge in its share price on the NSE, reaching ₹63.32, driven by heavy trading volumes following the government’s deposit of ₹92 Crore to settle immediate bond interest dues.

On July 11, Mahanagar Telephone Nigam Limited (MTNL) disclosed financial challenges preventing it from funding the escrow account required for the semi-annual interest payment on its series VIII-A bonds, due on July 20. The company needs to deposit funds into a designated trust account 10 days prior to meet these obligations.

A the time of writing on July 18, 2024 at 3:33 pm shares of Mahanagar Telephone Nigam Limited (MTNL) is currently trading at ₹64 which is a 20% gain than the previous close. Mahanagar Telephone Nigam Limited (MTNL) stock has gained a total of 231% in the last one year, and 93% since the beginning of the year.

Bloomberg reported on July 15 that MTNL faced funding shortages to meet its debt obligations, including local bonds worth ₹4,810 Crore ($576 million) due through the rest of 2024. It specifically couldn’t meet interest payments on its 7.59% July 2033 bonds, guaranteed by the government.

Responding to the liquidity crunch, the Union Government affirmed its commitment to honoring sovereign guarantees on MTNL’s bonds, ensuring timely interest payments without providing direct financial aid.

Media reports indicated government deliberations on transferring MTNL’s operations to BSNL, prompting stock exchanges to seek clarification. MTNL clarified that no formal decision had been made pending government approvals.

MTNL, a subsidiary of Bharat Sanchar Nigam Limited, operates in Mumbai, New Delhi, and Mauritius, providing telecom services. It held a monopoly in these regions until 1992 when the telecom sector was liberalized, maintaining a substantial subscriber base and market presence.