Mahanagar Telephone Nigam Limited (MTNL) has defaulted on a Rs 37.5 crore loan repayment to Punjab and Sind Bank, the state-owned telecom operator reported to the exchanges on Friday. The financially troubled company missed the latest installment payment of the principal loan amount on July 10.
MTNL revealed that its total unpaid principal amount is Rs 5,480.2 crore. The company’s outstanding borrowings from banks and financial institutions amount to Rs 7,780.2 crore, with total indebtedness reaching Rs 31,851.2 crore.
Telecom Minister Jyotiraditya Scindia announced on Thursday that the Department of Telecommunications (DoT) is closely monitoring MTNL. This default is the second such incident within a week. On Wednesday, the government intervened to pay the semi-annual interest to MTNL bondholders.
In July 2023, MTNL raised Rs 2,480 crore ($296.97 million) through 10-year sovereign-guaranteed bonds with a semi-annual coupon rate of 7.59%. Although the next interest payment is due on July 20, MTNL had already informed the exchanges last week about its inability to make the interest payments due to insufficient funds.
According to the tripartite agreement (TPA) between MTNL, DoT, and Beacon Trusteeship Ltd (the debenture trustee), MTNL is required to fund the semi-annual interest into an escrow account 10 days before the due date. When MTNL announced it couldn’t make the payments, the government stepped in and deposited the necessary funds into the designated trust and retention account by July 17.
Established in 1986, MTNL, a public sector undertaking (PSU) under the Ministry of Communications, was initially tasked with providing telephone services in Delhi and Mumbai. The company remained profitable until 2008-09 but has incurred losses every year since then, except for 2013-14.
In October 2019, the government approved a Rs 68,75 crore revival package for the loss-making telecom PSUs, BSNL and MTNL. The package proposed merging the entities and raising funds through sovereign-backed bonds. However, MTNL’s significant debt, which was Rs 23,500 crore in FY23, has delayed the merger with its relatively stable sister firm BSNL.
DoT officials have assured that MTNL will not be shut down, but its operations will be transferred to BSNL, a process that has already started.